65. Refer to the diagram, which pertains to a purely competitive firm. Curve C represents

A. total revenue and marginal revenue.
B. marginal revenue only.
C. total revenue and average revenue.
D. average revenue and marginal revenue.

Question

65. Refer to the diagram, which pertains to a purely competitive firm. Curve C represents

A. total revenue and marginal revenue.
B. marginal revenue only.
C. total revenue and average revenue.
D.  average revenue and marginal revenue.

BlackTom AI · Accepted Answer

For a purely competitive firm total revenue (TR), average revenue (AR) and marginal revenue (MR) are related by simple formulas:
- TR = P × Q (price times quantity)
- AR = TR / Q = P (revenue per unit)
- MR = d(TR)/dQ = P (additional revenue from one more unit)

Step-by-step reasoning using the diagram:
1. The upward-sloping line A through the origin is the total revenue line because TR = P × Q is a straight line through the origin with slope equal to price. As Q increases TR increases proportionally, producing the diagonal line labeled A.
2. The horizontal line C is flat at a constant dollar amount regardless of output. Marginal revenue for a perfectly competitive firm is constant and equal to the market price (MR = P), so MR is represented by a horizontal line at that dollar level.
3. Although average revenue for a perfectly competitive firm also equals price (AR = P) and is numerically the same as MR, the diagram specifically shows TR as the sloped line and the horizontal line as the derivative (the constant marginal addition to TR). The horizontal line is therefore representing MR — the constant change in TR per unit — as drawn.

Why the other choices are incorrect:
- A (total revenue and marginal revenue): The total revenue curve is the rising line A, not the horizontal C, so C cannot be TR.
- C (total revenue and average revenue): C is not TR (TR is A), and AR (revenue per unit) is not explicitly plotted as a separate curve here.
- D (average revenue and marginal revenue): Although AR equals MR numerically in perfect competition, the diagram’s horizontal line is being used to display marginal revenue (the constant derivative of TR); AR is not shown separately as a distinct average-per-unit curve in this figure.

Conclusion: Curve C in the diagram represents marginal revenue only. This matches the provided correct answer B.

65. Refer to the diagram, which pertains to a purely competitive firm. Curve C represents A. total revenue and marginal revenue. B. marginal revenue only. C. total revenue and average revenue. D. average revenue and marginal revenue.Single choice

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