CSEET · Economic and Business Environment · Basics of Demand and Supply and Forms of Market Competition
A firm in a perfectly competitive market sells each unit at the market price of ₹40. What is its marginal revenue (MR) when it sells the 100th unit?
Marginal revenue is ₹40. A perfectly competitive firm faces a horizontal demand curve at the market price, so every extra unit sold adds exactly the price to total revenue. Hence MR equals price, which is ₹40, at every level of output.
- A₹4,000
- BLess than ₹40 and falling as output rises
- C₹40Correct
- DZero
Explanation
Since the firm can sell any quantity at the same price, each extra unit adds exactly the price to total revenue. So MR equals price, which is ₹40, and the demand curve facing the firm is horizontal. Total revenue for 100 units would be ₹4,000, but that is not marginal revenue.
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