Question

The campus barber faces stiff competition from the large number of shops that surround the campus area, and for all practical purposes the market is perfectly competitive. He charges $10 for a haircut and cuts hair for 18 people a day. His shop is open for 5 days a week.
Calculate his weekly total revenue $__.
Calculate his average revenue per haircut $__.
Calculate his marginal revenue per haircut. $__.

Answer 1

Answer:

$900

$10

$10

Explanation:

A perfect competition is characterised by many buyers and sellers of homogeneous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.  

In the long run, firms earn zero economic profit.  If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.  

Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.  

In a perfect competition, price = marginal revenue = average revenue

if price is $10, marginal and average revenue is $10.

total revenue = price per haircut x total number of people he attends to in  a week.

total number of people he attends to in  a week = 18 x 5 = 90

Total revenue = $10 x 90 = $900