Question

In: Economics

Scenario 14-4 The information below applies to a competitive firm that sells its output for $40...

Scenario 14-4 The information below applies to a competitive firm that sells its output for $40 per unit. • When the firm produces and sells 150 units of output, its average total cost is $24.50. • When the firm produces and sells 151 units of output, its average total cost is $24.55. Refer to Scenario 14-4. Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 150 and at Q = 151?

a.

average fixed cost

b.

average revenue

c.

total cost

d.

total revenue

Expert Solution

b.average revenue.

Explanation :

In perfect competition, firms are price taker so they charge price what market price is. So at every level of output price will be same.

Total revenue =Price *quantity

So we can re write that as,

Price =total revenue /quantity

Average revenue =total revenue /quantity.

So as price will be same at every level of output, average revenue will also be same at every level of output.

Rahul Sunny answered 2 years ago

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