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Chapter 8: Problem 4

If a perfectly competitive firm sells 100 units of output at a market price of \(\$ 100\) per unit, its marginal revenue per unit is a. \(\$ 1\) b. \(\$ 100\) c. more than \(\$ 1,\) but less than \(\$ 100\). d. less than \(\$ 100\).

Short Answer

Expert verified
In a perfectly competitive market, a firm is a price taker and can sell any quantity of its product at the given market price. The firm in question sells 100 units of output at a market price of \$100 per unit, and since the marginal revenue in a perfectly competitive market is equal to the market price, the marginal revenue per unit for the firm is \$100. Thus, the correct answer is (b) \$100.

Step by step solution

01

In a perfectly competitive market, the firm is a price-taker and can sell any quantity of its product at the given market price. Therefore, the marginal revenue of a perfectly competitive firm is equal to the market price. #Step 2: Understand the given information#

The firm sells 100 units of output at a market price of $100 per unit. As the firm is in a perfectly competitive market, the market price remains constant no matter how many units it sells. #Step 3: Calculate the marginal revenue#
02

Since the marginal revenue in a perfectly competitive market is equal to the market price, the marginal revenue per unit for the firm is \(\$100\). #Step 4: Compare the marginal revenue to the answer choices#

In this case, the marginal revenue per unit is: a. not equal to \(\$1\) b. equal to \(\$100\) c. not in between \(\$1\) and \(\$100\) d. not less than \(\$100\) The correct answer is b. \(\$100\).

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