Price in a Perfectly Competitive Industry

question 247

Multiple Choice

Price in a perfectly competitive industry:

• A) is determined by each firm depending on its costs of production.
• B) is always equal to marginal revenue for the firm.
• C) must be greater than ATC or the firm will shut down in the short run.
• D) is indeterminate in the short run.

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Definitions:

Contribution Margin Ratio

The contribution margin ratio measures the percentage of sales revenue remaining after covering variable costs, contributing to covering fixed costs and generating profit.

Net Operating Income

A metric that calculates a company's profit after subtracting operating expenses but before interest and taxes are deducted.

Unit Variable Cost

The cost of producing one unit of a product or service which varies with the level of production or sales.

Monthly Sales

The total value or volume of sales transactions that a business completes within a single month, often used to assess performance trends.