Question

imagine the market for cell phone service in a small town, and assume that the marginal cost of a firm adding more customers is zero. the demand schedule is shown in this table. at what price point does marginal cost equal marginal revenue for a firm in a competitive market? click or tap the row of the table that shows this price point.

Answer 1

The price point where the quantity demanded remains constant and confirm that at this price point, the marginal revenue is indeed zero.

The price point where marginal revenue equals zero, follow these steps:

Understand the Marginal Revenue (MR) concept: Marginal Revenue is the additional revenue a firm receives from selling one more unit of a good or service. For a competitive market, the marginal revenue is equal to the market price since a firm can sell as much as it wants at the prevailing market price.

The price point where quantity demanded remains constant: In the demand schedule, find the price point where the quantity demanded (QD) remains the same as the price changes. This indicates zero marginal revenue.

Identify the corresponding price and quantity: Locate the row in the table where the quantity demanded does not change.

Confirm zero marginal revenue: Verify that at this price point, the marginal revenue is indeed zero.

Answer 2

On the demand schedule, we must find the price point where the marginal revenue is zero as this is the price point where marginal cost equals marginal revenue (MC=MR).

In a competitive market, firms maximize profits if they set their output level to where marginal cost equals marginal revenue. But here, since the marginal cost is zero, then, we are searching for price point where the marginal revenue is also zero.

We must bear in mind that demand schedule shows the quantity demanded at different price points.

As we need the price point where marginal revenue is zero, we must find price point where the quantity demanded (QD) does not change when the price changes.