Math Problem Statement
The graph displays the marginal cost, average total cost, and marginal revenue curves for a perfectly competitive firm. What is the market price?
The horizontal axis represents Quantity, ranging from 0 to 200 in increments of 10 units. The vertical axis represents S, ranging from 0 to 17 in increments of 17 units. From the Y-axis, a horizontal line labeled M R is drawn at 12. The graph plots two intersecting curves labeled as M C and A T C.
Multiple Choice $120 $14 $8 $12
Solution
In a perfectly competitive market, the market price is determined by the marginal revenue (MR) curve, which is horizontal and represents the price at which the firm can sell any quantity.
In this case, the MR line is drawn horizontally at $12. Therefore, the market price is $12.
Answer: $12
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Math Problem Analysis
Mathematical Concepts
Microeconomics
Perfect Competition
Cost Curves
Formulas
Marginal Revenue (MR) = Market Price in Perfect Competition
Profit Maximization Rule: MC = MR
Theorems
In a perfectly competitive market, the market price is equal to marginal revenue (MR) for the firm.
Suitable Grade Level
Grades 11-12 (Advanced Economics)
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