Why are marginal revenue and price the same? Explain.

1 Answer
Aug 21, 2015

Because, in a perfect competition market, the price does't decrease when the producers sells more units. Therefore, the firm earns the market price for each unit sold.


This concept only applies to a perfect competition market. In this market structure, all producers must sell the product for the market price. When doing so, every unit will earn them the price of the product.
The price doesn't decrease when more units are sold because there are many sellers in the market and none of them can impact the market price.