When a perfectly competitive firm sells additional units of output, its total revenue will

Question

BlackTom AI · Accepted Answer

To approach this question, we start from the basic relation between price, quantity, and total revenue in perfect competition. In a perfectly competitive market, the firm is a price taker, so the price (P) is constant for all units sold, and total revenue (TR) equals P times quantity (Q): TR = P · Q. This means TR increases linearly with Q, i.e., the increase in TR from selling each additional unit is the same every time.

Option 1: 'remain constant' would imply that TR does not change as output changes, which contradicts the TR = P · Q relationship where TR clearly grows with quantity. This option is incorrect.

Option 2: 'increase at a constant rate' aligns with TR = P · Q, since the slope d(TR)/dQ = P is constant. Each additional unit adds the same amount of revenue, so the total revenue rises by a fixed amount per unit. This option is consistent with perfect competition and is a correct interpretation.

Option 3: 'increase at a decreasing rate' would mean diminishing marginal revenue, which would happen if price fell with output or there were increasing costs affecting revenue, neither of which applies in a perfectly competitive, price-taking firm with constant price. This is incorrect.

Option 4: 'increase rapidly at first, then decline' suggests a non-monotonic revenue path, which cannot occur in the basic TR = P · Q framework for a firm facing a constant price. This is incorrect.

Option 5: 'increasie at an increasing rate' (note the misspelling) implies accelerating growth of TR with output, which contradicts the constant price assumption and the linear TR relationship. This is incorrect.

Overall, the reasoning shows that the only description consistent with a perfectly competitive firm's total revenue as output increases is a constant rate of increase per additional unit, i.e., TR rising linearly with Q. The remaining options either mischaracterize the revenue path or rely on scenarios that do not hold under perfect competition.

AP Economics-Hillebrand Unit 3 Exam (2025) v1- Requires Respondus LockDown Browser

When a perfectly competitive firm sells additional units of output, its total revenue will

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A firm has a demand curve of 𝑄 = 25 − 0.5 𝑃 . Which of the following is the correct revenue curve for this firm? Note that the horizontal axis on each graph is quantity and the vertical axis is revenue.

Figure 14-2Suppose a firm operating in a competitive market has the following cost curves:Refer to Figure 14-2. If the market price is $10, what is the firm's total revenue?

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AP Economics-Hillebrand Unit 3 Exam (2025) v1- Requires Respondus LockDown Browser

When a perfectly competitive firm sells additional units of output, its total revenue will

查看解析

登录即可查看完整答案

类似问题

A firm has a demand curve of 𝑄 = 25 − 0.5 𝑃 . Which of the following is the correct revenue curve for this firm? Note that the horizontal axis on each graph is quantity and the vertical axis is revenue.

Figure 14-2Suppose a firm operating in a competitive market has the following cost curves:​Refer to Figure 14-2. If the market price is $10, what is the firm's total revenue?

Scenario 15-1A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.Refer to Scenario 15-1. At Q = 500, the firm's total revenue is

Figure 5-3​Refer toFigure 5-3. At a price of $70 per unit, sellers' total revenue equals

Figure 5-7Refer to Figure 5-7. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Figure 5-3​Refer toFigure 5-3. At a price of $70 per unit, sellers' total revenue equals

Figure 5-7Refer to Figure 5-7. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

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Figure 14-2Suppose a firm operating in a competitive market has the following cost curves:Refer to Figure 14-2. If the market price is $10, what is the firm's total revenue?

Figure 5-3Refer toFigure 5-3. At a price of $70 per unit, sellers' total revenue equals

Figure 5-3Refer toFigure 5-3. At a price of $70 per unit, sellers' total revenue equals