For Perfectly Competitive Firms, What Is the Relationship Among Market

question 64

Multiple Choice

For perfectly competitive firms, what is the relationship among market price (P) , average revenue (AR) , and marginal revenue (MR) ?

• A)P = AR = MR
• B)P > AR = MR
• C)P = AR > MR
• D)P = AR < MR
• E)P < AR = MR

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing potential benefits that are missed.

Contribution Margin

The difference between a product's selling price and its total variable costs, which helps cover fixed costs and create profit.

Net Operating Income

The profit generated from a company's core business operations, excluding deductions for interest and taxes.

Contribution Approach

An accounting method where all variable costs are subtracted from sales to find the contribution margin, which is then used to cover fixed costs and profits.