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Question
What is the relation between market price and average revenue of a price taking firm?
Short/Brief Note
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Solution
Average Revenue is defined as the revenue per unit of the output sold. It is expressed as the ratio between total revenue and the output sold.
`"AR"="TR"/Q`
We know that
TR = P × Q
`"AR"=(PxxQ)/Q`
AR = P
Thus, the market price and the average revenue are the same for a perfect competitive firm.
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