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In a competitive market, the marginal revenue function is?

1) flat since all firms are price takers
2) flat since demand is downward sloping
3) downward sloping since marginal revenue is the price
4) downward sloping since all firms are price takers

1 Answer

4 votes

Final answer:

In a competitive market, the marginal revenue function is flat since all firms are price takers.

Step-by-step explanation:

In a competitive market, the marginal revenue function is flat since all firms are price takers. This means that each firm in a perfectly competitive market has no control over the price of its product and can only sell its output at the prevailing market price. As a result, the marginal revenue for each additional unit sold is constant and equal to the market price.

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