True or false: the competitive firm

Exercise and reference answers

Questions

1. Statement is true

   Yes

   Statement

   For a price-taking firm, average revenue equals the market price.

2. Statement is true

   Yes

   Statement

   For a price-taking firm, marginal revenue equals the market price.

3. Statement is true

   No

   Statement

   Profit keeps rising while marginal revenue is below marginal cost.

4. Statement is true

   Yes

   Statement

   Profit is largest where marginal revenue equals marginal cost.

Instructions

Decide whether each statement about a competitive firm is true or false.

Explanation