Multiple choice

If a competitive firm doubles its output, its total revenue

  1. doubles

  2. more than doubles

  3. less than doubles

  4. cannot be determined because the price of the good may rise or fall

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a perfectly competitive market, firms are price takers and face a horizontal demand curve at the market price. When a firm doubles its output, the price per unit remains unchanged. Therefore, Total Revenue = Price × Quantity, so doubling quantity exactly doubles total revenue.

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