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Speciemen

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA BT – FIA FBT › Speciemen

  • This topic has 1 reply, 2 voices, and was last updated 9 months ago by Ken Garrett.
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  • April 11, 2022 at 6:56 pm #653097
    maximus07
    Participant
    • Topics: 407
    • Replies: 398
    • ☆☆☆☆

    Which of the following statements is true in relation to the average revenue function of a business in a perfect market?
    A It is diagonal
    B It is horizontal
    C It is vertical

    Answer is B. In answer, it is saying that demand curve is horizontal in perfect market. Are they both same?

    April 11, 2022 at 8:33 pm #653110
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10193
    • ☆☆☆☆☆

    In a perfect market each company is small and can sell as much as they can make at the going market price. There is no need to lower/raise selling prices to alter sales volume. If the selling price is constant the average revenue is constant.

    The demand curve for the industry is not horizontal (lf all companies charged a lower price, demand would increase) but the demand curve for each company is horizontal. The market price is charged snd you can sell whatever volume you want to.

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