Question

What is the behaviour of average revenue in a market in which a firm can sell more only by lowering the price?

Answer 1

Average revenue (AR) of a firm is the total revenue per unit of output sold. AR = p * q/q = p. When AR equals the market price, the firm can sell any amount of good at a given price. If the firm sells more quantity of output by lowering the price, then the AR curve slopes downwards.