If a perfectly competitive firms total revenue is less than its total variable cost, the firm
FIRMS IN COMPETITIVE MARKETS Show
You should understand:
KEY POINTS:
I. What Is a Competitive Market?
D. The Firm’s Long-Run Decision to Exit or Enter a Market
Monopoly KEY POINTS:
Be sure you know what a monopoly is and why they can remain a monopoly. What are the barriers to entry and what are some real-world examples? What is a natural monopoly? Be able to compare the monopoly situation to perfect competition: price, demand, marginal cost, marginal revenue, welfare, and etc. How should we regulate monopolies? Know the graphs! What happens when total revenue is less than total variable cost?If total revenue were less than total variable cost, the firm's economic loss would exceed total fixed cost. So the firm would shut down temporarily. Total fixed cost is the largest economic loss that the firm will incur. The firm's economic loss equals total fixed cost when price equals average variable cost.
Is marginal revenue less than price in a perfectly competitive firm?less than price, whereas marginal revenue is equal to the price for a perfectly competitive firm. For a monopolist, the marginal revenue is always less than the price because the firm faces a downward-sloping demand curve. In order to sell an additional unit of its output, it has to reduce its price.
What happens when a perfect competitor charges more less?Summary. A perfectly competitive firm is a price taker, which means that it must accept the equilibrium price at which it sells goods. If a perfectly competitive firm attempts to charge even a tiny amount more than the market price, it will be unable to make any sales.
What happens to the price of the product and the total revenue for a perfectly competitive firm if it doubles the amount of output it supplies in the market?Doubling the sales will not change the price. However, doubling the sales affects the revenues in that they double. In conclusion, if a firm in a competitive market doubles the sales, the price is unchanged, but its total revenue doubles.
|