Final answer:
The total revenue of a perfectly competitive firm is found by multiplying the market price by the quantity of goods sold. Profits are maximized where total revenues exceed total costs by the largest margin and where price equals marginal cost.
Step-by-step explanation:
The total revenue of a perfectly competitive firm is calculated by multipling price by quantity. A perfectly competitive firm takes the market price as given and can sell any number of products at this price. Therefore, total revenue increases at a constant rate as more units are sold. To determine profits, firms examine where total revenues exceed total costs by the greatest amount, which is where marginal revenue equals marginal cost, with marginal revenue being the same as price in perfect competition.
A perfectly competitive firm calculates its total revenue by multiplying price by quantity.
In a perfectly competitive market, the firm has no control over the price and is a price taker, meaning it must accept the market price for its output. This means that the firm can sell any number of units at exactly the same price.
By multiplying the market price by the quantity of output sold, the firm can determine its total revenue. This helps the firm determine its total costs and profits.