What Is the Relationship Among the Following Variables for a Perfectly

question 181

Multiple Choice

What is the relationship among the following variables for a perfectly competitive firm: the market price, average revenue and marginal revenue?

• A)Average revenue is equal to the market price; average revenue is greater than marginal revenue.
• B)The market price is equal to both average revenue and marginal revenue.
• C)Average revenue is equal to marginal revenue; average revenue is greater than the market price.
• D)As a firm lowers the market price to sell more output, marginal revenue and average revenue will be less than the market price.

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Definitions:

Common Stock

Equity ownership in a corporation, with voting rights and potential dividends.

Initial Value Method

An accounting method for investments where the investment is recorded and maintained at its original cost without adjustment for changes in market value.

Common Stock

Equity ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Equity Method

An accounting technique used to assess the profits earned by investments in other companies, where the investment income is proportional to the ownership stake.