Question

Which one of the following is true? In a perfectly competitive market, the:

• A. Average Revenue (AR) = Marginal Revenue (MR)
• B. Average Revenue (AR)>Marginal Revenue (MR)
• C. Average Revenue (AR) < Marginal Revenue (MR)
• D. Average Revenue (AR) = Total Revenue (TR)

Hint:

In perfect competition, AR and MR are equal, as firms accept the market price.

Answer 1

The Correct Option is A

Step 1: Concept of average revenue and marginal revenue.
In a perfectly competitive market, average revenue (AR) refers to the revenue per unit of output, and marginal revenue (MR) refers to the additional revenue from selling one more unit of output. In a perfectly competitive market, both are equal to the price of the good.
Step 2: Perfect competition characteristics.
In a perfectly competitive market, firms are price takers, meaning they cannot influence the market price. Therefore, the price of the good is constant, and thus average revenue and marginal revenue are equal.
Step 3: Conclusion.
Thus, the correct answer is (A) Average Revenue (AR) = Marginal Revenue (MR). Final Answer: \[ \boxed{\text{Average Revenue (AR) = Marginal Revenue (MR).}} \]