Question

In: Economics

Which of the followings regarding a firm in perfect competition is correct? a. The firm cannot...

Which of the followings regarding a firm in perfect competition is correct?

a.

The firm cannot exit the market in the long run if its average cost is above market price.

b.

For all firms, average revenue equals the price of the good.

c.

If a firm raises its price, the firm may be able to increase its total revenue.

d.

Each firm faces a downward sloping demand.

Solutions

Expert Solution

For all firms, average revenue equals to the price of the good.

In perfectly competitive market, each firm is a price taker. All the firms have to accept the same price as determined by market forces of demand and supply. As a result uniform price prevails in the market. Therefore average revenue is equal to price for all firms.


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