2. Explain relationship between Average revenue and Marginal revenue
When price remain constant
When price is not constant
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The relationship between average revenue and marginal revenue is the same as between any other average and marginal values. When average revenue falls marginal revenue is less than the average revenue. When average revenue remains the same, marginal revenue is equal to average revenue.
Explanation:
The case of perfect competition when for an individual firm average revenue (or price) remains constant and marginal revenue is equal to average revenue is graphically shown in Fig. ... Marginal revenue (MR) curve coincides with average revenue (AR) curve since marginal revenue is equal to average revenue.
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