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CMA Foundation · Fundamentals of Business Economics and Management · Forms of Market

A wheat farmer in a perfectly competitive market sells each quintal at the market price of Rs 2,000. What is the marginal revenue from selling one additional quintal?

Marginal revenue is Rs 2,000, equal to price. In perfect competition the firm sells every unit at the same given market price, so each additional quintal adds exactly that price to total revenue, making MR equal to AR and price.

  1. ALess than Rs 2,000, because price must fall to sell more
  2. BZero, because the market is saturated
  3. CRs 2,000, equal to priceCorrect
  4. DMore than Rs 2,000, because of economies of scale

Explanation

A price-taking firm can sell any quantity at the same market price. Each extra unit therefore adds revenue equal to the price, so MR = AR = P = Rs 2,000. Option A describes a firm with market power.

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