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The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm
has perfect information.
wants to maximize its profits.
is a price taker.
faces constant returns to scale
- Option 1: has perfect information
- In a perfectly competitive market, all firms have access to all necessary information, but this does not impact the shape of the revenue curve.
- Option 2: wants to maximize its profits
- All firms, whether competitive or not, aim to maximize profits. This desire does not directly influence the slope or shape of the revenue curve.
- Option 3: is a price taker
- In perfect competition, firms cannot set their own prices and must accept the market price. Hence, the total revenue curve is a straight line as revenue increases proportional to units sold.
- Option 4: faces constant returns to scale
- Constant returns to scale refer to a situation where increasing inputs leads to a proportional increase in output. This concept is more related to cost curves, not revenue curves.
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