In perfect competition, the demand curve is equal to the marginal revenue (MR) curve. This is because perfect competition is characterized by a large number of buyers and sellers, homogeneous products, perfect information, and ease of entry and exit into the market.

The demand curve represents the relationship between the price of a product and the quantity of that product that consumers are willing and able to purchase at that price. In perfect competition, each firm is a price taker, meaning that they have no control over the price of the product. The price is determined by the market forces of supply and demand.

When a perfectly competitive firm decides to increase its output, it must lower the price of its product in order to sell more. This is because the firm's individual output is a small fraction of the total market output, so it cannot affect the market price. As a result, the marginal revenue earned by the firm from selling an additional unit of output is equal to the price of the product.

To understand why the demand curve is equal to the MR curve in perfect competition, let's consider the following points:

1. MR represents the additional revenue earned by a firm from selling one more unit of output. In perfect competition, where the firm is a price taker, the price remains constant regardless of the quantity sold. Therefore, the additional revenue earned from selling one more unit is equal to the price of the product.

2. In perfect competition, the demand curve is a horizontal line because the firm can sell any quantity of output at the market price. This means that the firm's marginal revenue remains constant at the market price.

3. Since the demand curve is a horizontal line and the marginal revenue curve is also a horizontal line at the market price, the two curves are equal to each other.

In summary, in perfect competition, the demand curve is equal to the marginal revenue curve because the firm is a price taker and can sell any quantity of output at the market price. The constant market price ensures that the additional revenue earned from selling one more unit of output is equal to the price of the product.

Monopoly