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Questions
Under what market condition does Average Revenue always equal Marginal Revenue? Explain.
In which market form are average revenue and marginal revenue of a firm always equal? Give a reason for your answer.
Explain
Give Reasons
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Solution
Under the perfect competition market, AR is equal to MR at all levels of output. Individual buyers cannot influence the market price of a good by varying their demands, and an individual buyer is a price taker and not a price maker.
Hence, AR = MR and the price will remain the same. The MR curve is a straight horizontal line that is parallel to the X-axis and coincides with the AR curve.
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