Question

draw AR and MR diagram of perfect compition and Monopoly market ( with table)​

Answer 1

Answer:

Revenue Curve under Perfect competition:

Perfect competition is the term applied to a situation in which the individual buyer or seller (firm) represent such a small share of the total business transacted in the market that he exerts no perceptible influence on the price of the commodity in which he deals.

Thus, in perfect competition an individual firm is price taker, because the price is determined by the collective forces of market demand and supply which are not influenced by the individual. When price is the same for all units of a commodity, naturally AR (Price) will be equal to MR i.e., AR = MR. The revenue schedule for a competitive firm is shown in the table 5.

Revenue Schedule for a Competitive Firm.

(with the attached table from the textbook)In table 5 we find that as output increases, AR remains the same i.e. Rs. 5. Total revenue increases but at a constant rate. Marginal revenue is also constant i.e. Rs. 5 and is equal to AR.

Thus

TR = AR x Q

Also TR = MR x Q [Since AR = MR]

In figure 8, on the X-axis, we take quantity whereas on Y-axis, we take revenue. At price OP, the seller can sell any amount of the commodity. In this case the average revenue curve is the horizontal line. The Marginal Revenue curve coincides with the Average Revenue.

It is because additional units are sold at the same price as before. In that case AR = MR. A noteworthy point is that OP price is determined by demand and supply of industry.

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