{"id":240157,"date":"2025-07-03T07:39:23","date_gmt":"2025-07-03T07:39:23","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=240157"},"modified":"2025-07-03T07:39:24","modified_gmt":"2025-07-03T07:39:24","slug":"for-a-firm-in-a-perfectly-competitive-market-average-revenue-equals-average-cost","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/07\/03\/for-a-firm-in-a-perfectly-competitive-market-average-revenue-equals-average-cost\/","title":{"rendered":"For a firm in a perfectly competitive market, average revenue equals average cost."},"content":{"rendered":"\n

For a firm in a perfectly competitive market, average revenue equals average cost. the change in total revenue. the market price. price divided by quantity.<\/p>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

In a perfectly competitive market, average revenue equals average cost<\/strong> when the firm is operating at break-even<\/strong> or normal profit<\/strong>. In such a scenario, total revenue<\/strong> equals total cost<\/strong>, and the firm is neither making an economic profit nor a loss. The price in a perfectly competitive market is determined by the market equilibrium<\/strong> and is equal to both average revenue (AR)<\/strong> and marginal revenue (MR)<\/strong> for the firm.<\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

To break this down:<\/p>\n\n\n\n

    \n
  1. Average Revenue (AR)<\/strong> is the revenue a firm receives per unit of output. In a perfectly competitive market, since the firm is a price taker, the price of the good is constant regardless of the quantity the firm produces. Therefore, average revenue<\/strong> is equal to the market price at any level of output.<\/li>\n\n\n\n
  2. Marginal Revenue (MR)<\/strong> is the change in total revenue from producing one more unit of output. In perfect competition, marginal revenue is also equal to the price because the firm sells all its units at the same price.<\/li>\n\n\n\n
  3. Average Cost (AC)<\/strong> is the total cost of production per unit of output. When average revenue equals average cost, the firm is producing at a level where it covers all its costs, but does not make any economic profit. This is the break-even point, where normal profit<\/strong> occurs.<\/li>\n\n\n\n
  4. Change in Total Revenue<\/strong>: In perfect competition, total revenue (TR) is the price multiplied by the quantity produced (TR = P \u00d7 Q). If the price is constant (as it is in perfect competition), a change in quantity will lead to a proportional change in total revenue.<\/li>\n<\/ol>\n\n\n\n

    Thus, when average revenue equals average cost, the firm is earning zero economic profit, where price equals both average revenue and marginal revenue, and there is no incentive to either enter or exit the market.<\/p>\n\n\n\n

    \"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

    For a firm in a perfectly competitive market, average revenue equals average cost. the change in total revenue. the market price. price divided by quantity. The Correct Answer and Explanation is: In a perfectly competitive market, average revenue equals average cost when the firm is operating at break-even or normal profit. In such a scenario, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-240157","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/240157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=240157"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/240157\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=240157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=240157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=240157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}