Relationship Between Total, Average and Marginal Revenues Under Perfect Competition

• Total Revenue (TR): Money received by selling a given quantity of goods.
• Average Revenue (AR): Revenue per unit; calculated as AR = TR ÷ Q (quantity sold).
• Marginal Revenue (MR): Extra revenue from selling one more unit; MR = TR_n − TR_(n−1).

In perfect competition, AR and MR are always equal and flat (parallel to the X-axis). This means the selling price does not change when you sell more units.
Real-life connection: Think of a shop where each pen sells for ₹10 and you can sell any number at this price.

Here, as price drops, both AR and MR fall. MR always stays below AR. This happens in monopolies or when products aren't all the same.
Example: If you lower the price to sell more, your extra earnings from each unit sold become less.

If AR rises as you sell more units (rare case), MR will rise even faster and stay above AR.

• AR and MR are always calculated from TR.
• If AR is flat, MR is also flat and equal—perfect competition.
• If AR falls, MR falls at a faster rate—imperfect competition or monopoly.
• If AR rises, MR is above AR, and both increase.
• Diagrams clearly show differences in market competition.