If a firm sells 7 units at a market price of \$25, what is the average revenue per unit?

• A. \$175
• B. \$32
• C. \$3.57
• D. \$25

Answer: (D)

Verified step by step guidance

1. Recall that average revenue (AR) is defined as total revenue (TR) divided by the quantity (Q) sold, so the formula is: \(\text{AR} = \frac{\text{TR}}{Q}\).
2. Calculate total revenue (TR) by multiplying the market price (P) by the quantity sold (Q): \(\text{TR} = P \times Q\).
3. Substitute the given values into the total revenue formula: \(\text{TR} = 25 \times 7\).
4. Use the total revenue value to find average revenue by dividing it by the quantity sold: \(\text{AR} = \frac{\text{TR}}{7}\).
5. Recognize that since the price is constant for each unit sold in a perfectly competitive market, the average revenue per unit equals the market price, which is \$25$.