Vesoro is one of more than a hundred perfectly competitive firms in Boston that

Question

Vesoro is one of more than a hundred perfectly competitive firms in Boston that produce extra-large cardboard boxes for moving. The following graph shows the market demand and supply curves. On the following graph, use the red line (cross symbols) to plot the demand curve for Vesoro's extra-large cardboard boxes. The demand curve that Vesoro faces is identical to which of its other curves? Check all that apply. Its marginal cost curve Its marginal revenue curve Its average revenue curve Its supply curve

Explanation / Answer

The displayed line in the figure is correct. The market demand and market supply gives the equilibrium price of $25. Now, Vesoro being one firm in the competitive industry would be able to sell as much as it wants at this price of $25. Hence, its demand curve is a horizontal line at price of $25.

Marginal Revenue Curve AND Average Revenue Curve

Output Price Total Revenue Marginal Revenue Average Revenue 0 25 0 1 25 25 25 25 2 25 50 25 25 3 25 75 25 25

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