perfect_competition

When the equilibrium price has been established a

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

Ask a homework question - tutors are online