Asked by Juleny Degollado on Jun 12, 2024
Verified
Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be
A) less than $12.
B) more than $12.
C) $12.
D) zero.
Average Revenue
The amount of income that a company receives per unit of sale, calculated by dividing total revenue by the number of units sold.
Total Revenue
Total revenue represents the total income a firm receives from selling its goods or services, calculated as the quantity sold multiplied by the price per unit.
Competitive Market
A market structure characterized by a large number of buyers and sellers, where no single entity has the power to significantly influence prices or market conditions.
- Calculate and analyze the mean and incremental revenue derived from specified information.
Verified Answer
SS
Sandeep SinghJun 14, 2024
Final Answer :
C
Explanation :
The average revenue per unit is calculated by dividing the total revenue by the number of units sold. In a competitive market, the price per unit (and thus the average revenue per unit) remains constant regardless of the quantity sold. Since the firm initially earns $1,800 from 150 units, the average revenue per unit is $12 ($1,800 / 150 units). Therefore, the average revenue of the 200th unit will also be $12, as the price per unit does not change with the quantity sold in a competitive market.
Learning Objectives
- Calculate and analyze the mean and incremental revenue derived from specified information.