Why does price equal marginal revenue for the purely competitive firm? What is the relationship to the demand curve for the firm?
What will be an ideal response?
The purely competitive firm is a “price-taker” in the market. The price it receives for its output is constant and does not vary across its range of output. Marginal revenue is defined as the change in total revenue from selling one more unit of output. One more unit of output will be sold at a constant, market-determined price. Thus, price will be equal to the marginal revenue for the firm. Also, the firm’s demand curve will be perfectly elastic because no matter how much or how little the firm produces it will receive the same price per unit of output. Thus, demand equals price and marginal revenue.
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The largest portion of any nation's current account is typically
A) imports and exports. B) gold sales. C) the sale of U.S. assets. D) SDRs.
As extraction of a nonrenewable resource increases, the supply curve shifts up because:
a. more substitutes become available. b. competition among the existing suppliers intensifies. c. the marginal cost of extracting any given amount increases. d. the resource finds alternative usage. e. the resource becomes less productive.