Questions: 23. For a firm in a perfectly competitive market, the price of the good is always a. equal to total revenue. b. equal to marginal revenue. c. greater than average revenue. d. All of the above are correct.

23. For a firm in a perfectly competitive market, the price of the good is always a. equal to total revenue. b. equal to marginal revenue. c. greater than average revenue. d. All of the above are correct.
Transcript text: 23. For a firm in a perfectly competitive market, the price of the good is always a. equal to total revenue. b. equal to marginal revenue. c. greater than average revenue. d. All of the above are correct.
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Solution

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The answer is b: equal to marginal revenue.

Explanation for each option:

a. Equal to total revenue: This is incorrect. Total revenue is the overall income a firm receives from selling its goods, calculated as the price per unit times the quantity sold. The price of the good is not equal to total revenue; rather, it is a component used to calculate total revenue.

b. Equal to marginal revenue: This is correct. In a perfectly competitive market, firms are price takers, meaning they accept the market price as given. The price of the good is equal to marginal revenue because each additional unit sold adds exactly the market price to total revenue.

c. Greater than average revenue: This is incorrect. In a perfectly competitive market, the price of the good is equal to average revenue. Average revenue is calculated as total revenue divided by the quantity sold, which, in a perfectly competitive market, equals the price of the good.

d. All of the above are correct: This is incorrect because only option b is correct.

In summary, for a firm in a perfectly competitive market, the price of the good is always equal to marginal revenue.

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