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Thursday, 5 May 2011

Relation of Marginal Revenue and Average Revenue under Perfect Competition

In a perfect competition a single seller can not influence the market price. The firm has to sell the product at the market price. Factors of production can freely move from one sector to another sector . In a perfect competition, there will be one price of a commodity in all the parts of the market.

We can explain the nature of AR and MR curves by the following schedule and diagram :

EXPLANATION :- The demand curve which a firm has to face in a perfect competition is a horizontal straight line. The ARC is a horizontal straight line because a firm can sell the commodity at the rolling market price only.
Curve DD'. represent three things AR = MR = Price. Under perfect competition AR,MR and price are same while in imperfect competition MR always remains below than AR.

1 comments:

Anonymous,  3 February 2013 at 10:13  

Thanks alot..:)

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