If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: will be less than $5. may be either greater or less than $5. will be greater than $5. will also be $5.

Question

Tessie

Business

5 August, 17:49

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: will be less than $5. may be either greater or less than $5. will be greater than $5. will also be $5.

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Answers (1)

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Dorian Hale · Answer 1

will also be $5.

Explanation:

Marginal revenue is an increase in revenue as a result of increase in sells by one unit.

Equilibrium price is the price at which the quantity of goods supplied is the same as the quantity of goods demanded.

For a firm that is a competitor, it has a small market and the quantity of goods produced and sold has no effect on the price. Therefore price elasticity of demand is negative infinity, and marginal revenue would be the same as the equilibrium price.