When the equilibrium price has been established a

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Unformatted text preview: titive Firm is Horizontal! When the equilibrium price has been established, a single perfectly competitive faces a horizontal demand curve at the equilibrium price. The Marginal Revenue Curve of a Perfectly Competitive Curve is the Same as its Demand Curve • The firm’s marginal revenue is the change in total revenue that results from selling one additional unit of output. • Notice that marginal revenue at any output level is always equal to the equilibrium price. For a perfectly competitive firm, price is equal to marginal revenue. • The marginal revenue curve for the perfectly competitive firm is the same as its demand curve. The Demand Curve and the Marginal Revenue Curve for a Perfectly Competitive Firm Theory and Real World Markets A market that does not meet the assumptions of perfect competition may nonetheless approximate those assumptions to such a degree that it behaves as if it were a perfectly competitive market. If so, the theory of perfect competition can be used to predict the market’s behavior. Q&A • A price taker does not have the ability t...
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