State the Relation Between Marginal Revenue and Average Revenue. - Economics

Advertisement Remove all ads
Advertisement Remove all ads
Advertisement Remove all ads

State the relation between marginal revenue and average revenue.

Advertisement Remove all ads


Marginal Revenue (MR) and Average Revenue (AR):

The relationship between MR and AR can be explained through two forms of market, i.e. perfect competition market and imperfect competition market.

i. Under the perfect competition market, AR is equal to MR at all levels of output.Hence, the MR curve is a straight horizontal line which is parallel to the X-axis and coincides with the AR curve

ii. Under the imperfect competition market, as the output or sales increases, both AR and MR curves decline. However, AR remains greater than MR at all levels of output. Also, when AR becomes zero, the MR will be negative.

Concept: Total, Average and Marginal Revenue
  Is there an error in this question or solution?
2013-2014 (March) Delhi Set 1

Video TutorialsVIEW ALL [1]


      Forgot password?
View in app×