1. What do a firm’s Marginal Revenue (MR) and Demand curves look like in perfect competition? Draw them in a Quantity-Price/MR diagram (don’t forget to label the axes).
2. Why do the MR and Demand curves look the way you draw? Briefly explain.
3. Now add a Marginal Cost curve (MC) to the diagram you drew above. How is the profit-maximizing output in perfect competition determined? Mark this output as q* in the diagram.
4. What is the price a firm in perfect competition will charge for its product? Is this price related to the output level of this particular firm? Why or why not?

Answer rating: 100% (QA)

In perfect competition a firms marginal revenue MR and demand curves have specific characteristics Heres how they look in a quantitypriceMR diagram Ax... View the full answer