Asked by Aufata Aiesi on May 25, 2024
Verified
As output rises,the MRP of an imperfect competitor will _____ that of a perfect competitor.
A) rise faster than
B) fall faster than
C) rise at the same rate as
D) fall at the same rate as
MRP
Short for Marginal Revenue Product, it represents the additional revenue generated by employing one more unit of a factor, such as labor or capital.
Imperfect Competitor
An imperfect competitor is a market participant that does not meet the conditions of perfect competition, often having some control over the price of its products due to a lack of numerous competitors or product differentiation.
Perfect Competitor
A theoretical firm in a perfectly competitive market that cannot influence the market price and accepts the price as given.
- Distinguish between the marginal revenue product (MRP) of perfect and imperfect competitors as output changes.
Verified Answer
GS
Gurvinder SinghMay 28, 2024
Final Answer :
B
Explanation :
As output rises, the MRP (marginal revenue product) of an imperfect competitor will fall faster than that of a perfect competitor. This is because imperfect competitors have some degree of market power and can raise prices, but as they increase output, they face diminishing returns to scale, leading to a larger decrease in MRP compared to perfect competitors who face constant returns to scale.
Learning Objectives
- Distinguish between the marginal revenue product (MRP) of perfect and imperfect competitors as output changes.