Under conditions of perfect or pure competition, or close to those conditions, producers (firms) are what are called “price takers”. This means that the price for the product that they are selling is determined by the market. No matter how little or how much product they supply, they can sell all they want at that price. If they were to price their product higher, they will sell zero. Which of the following is true?The price is equal to marginal revenue but not average revenueThe price is equal to marginal revenue and average revenueThe price is equal to average revenue but is not equal to marginal revenueThe price is above both marginal revenue and average revenue

Answer: Correct option: option (2) Explanation: In the case of perfect competition, price is always…

Answered: Under conditions of perfect or pure…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Under conditions of perfect or pure competition, or close to those conditions, producers (firms) are what are called “price takers”. This means that the price for the product that they are selling is determined by the market. No matter how little or how much product they supply, they can sell all they want at that price. If they were to price their product higher, they will sell zero. Which of the following is true?

The price is equal to marginal revenue but not average revenue
The price is equal to marginal revenue and average revenue
The price is equal to average revenue but is not equal to marginal revenue
The price is above both marginal revenue and average revenue

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