What is the relation between market price and marginal revenue of a price-taking firm?

Total revenue is defined as the total sales proceeds of a producer by selling corresponding level of output. In other words, it is defined as price times the quantity of...

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...

At Price, P1 = Rs 10 Total Revenue, TR1 = P1 x Q1 = 50 = TR1/P1 = Q1 = 50/10 = Q1 = Q1 = 5units At Price, = Rs 15 Total Revenue, TR2 =...

Market price and average revenue of a price taking firm are equal. Both are indicated by a horizontal straight line. Because market price is constant for a price taking firm.

Total revenue is the multiplication of quantity sold and market price, whereas market price is the ratio of total revenue and quantity sold. TR = P X Q P = △TR/△Q

Under perfect competition, market form a firm's marginal revenue is always equal to price.

(i) When MR< AR, AR falls. (ii) When MR = AR, AR is constant. (iii) When MR > AR, AR rises.

MR is constant at all levels of output.

In such a market whether the firm sells more or less, it does not affect the market price. It makes the average revenue constant as output is increased. According to marginal...