explain the total revenue and marginal revenue of a firm under perfect competition with the help of diagram
Answers
Explanation:
i) Total Revenue: The total revenue is the aggregate revenue received by the seller from the sale of the entire output. It is obtained by multiplying the units sold with the price of the product. It may be stated as follows: TR = p x q where, p is price and q is quantity sold .
Marginal revenue is the change in total revenue when one more unit of a commodity is sold.
MR= change in TR/change in quantity sold
Average revenue refers to revenue per unit of output.
AR=TR/Q
Relationship between AR and MR:
If AR is constant, MR is equal to AR. Both are indicated by the same horizontal straight line(a situation of perfect competition)This can be shown in diagram given below: In the diagram, TR curve increases with the increase in quantities sold. The Price is equal to AR and MR represented as horizontal line parallel to ‘x’ axis. In this market, price does not change, therefore, there will be no change in AR and MR.
Thus, in perfect market, demand curve, AR and MR curves coincide in the same horizontal line
refer to the attachment
