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Question
A firm is able to sell any quantity of a good at a given price (i.e. a situation of perfect competition). The firm’s MR will be:
Options
MR > AR
MR = AR
MR < AR
none of these
MCQ
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Solution
MR = AR
Explanation:
Under perfect competition, each additional unit is sold at the same market price. Both marginal revenue and average revenue equal that price, so MR = AR.
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