Microeconomics - Perfect Competition - Question (Check My Answers)?

Question

Alwite is a perfectly competitive firm that produces white t-shirts. The market for white t-shirts is perfectly competitive and the market price of a t-shirt is $10.

#1 - What will be Alwite's total revenue if it sells 20 t-shirts?

A. $100

B. $30

C. $200

D. $150

My Answer: C

#2 - What will be Alwite's total revenue if it sells 21 t-shirts?

A. $160

B. $210

C. $290

D. $90

My Answer: B

#3 - What is Alwite's marginal revenue when it increases production from 20 to 21 white t-shirts?

A. $16

B. $20

C. $10

D. $8

#4 - True or False: Alwite's marginal revenue is the same for all levels of production.

True

False

My Answer: This is why I asked this question. I'm torn between True & False...It can be false because perfect competition has perfect elasticity components...It can be true because of P = MR = demand

Answer 1

Jurri-E gave you the correct responses.  Marginal revenue IS price and would graph demand perfectly elastic at this price.  MR does not change with the level of output.  The only thing that could change it, would be a change in the market price for the product.  Once again, the answer to #4 is TRUE.

Answer 2

The third answer is C, which is the cost of an extra t-shirt.

Marginal revenue per t-shirt is the same, but marginal revenue for all levels of production varies depending on how much they produce.

Answer 3

You didn't answer #3.  It's C

Your other 2 answers are correct.

False.  Their marginal revenue per t-shirt is the same at all levels.  Their marginal revenue for the company is much higher.  They make a lot more if they sell 2,000 than 20.

Answer 4

#1 - C. $200 = $10*20

#2 - B. $210 = $10*21

#3 - C. $10 = $210-$200

#4 - True, under perfect competition condition changing quantity by supplier will not affect price, so each t-shirt will give revenue of t-shirt's constant price P=$10=MR