Show that average revenue of a product is also the price of the product.
Answers
In a perfectly competitive market structure, average revenue is equal to price due to constant price per unit of the goods and services.
Explanation:
In a perfectly competitive market,there are no legal or administrative barriers to entry for any firm or seller and every firm or seller usually sells identical product or service in the market.This leads to high market competition or rivalry and all the firms or sellers in the market are consequently compelled to charge constant or identical price per unit for the output that they sell.Hence,since the price of the products and services in a perfectly competitive market is constant or fixed,the marginal revenue or the additional or incremental revenue earned by the firms or sellers by selling additional or 1 more unit of the output is equal to the per unit price of the output.Therefore,the revenue obtained from selling per unit of output is also constant and equal to the product/service price which automatically implies that the average revenue obtained by the firms or companies is also equal to the product or service price in a perfectly competitive market structure.