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Explain the nature of shape of AR curve of a firm under perfect competition.?
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Explain the nature of shape of AR curve of a firm under perfect compet...


Nature of Shape of AR Curve Under Perfect Competition




Horizontal Shape:
In perfect competition, a firm faces a perfectly elastic demand curve, which means that the average revenue (AR) curve is horizontal. This is because the firm can sell any quantity of output at the prevailing market price.




Identical to the Price Line:
The AR curve coincides with the market price line in perfect competition. This is because a firm in perfect competition is a price taker and has no control over the price of the product. Therefore, the AR curve is identical to the price line.




Constant AR:
The AR curve is constant and equal to the market price in perfect competition. This is because the firm can sell any quantity of output at the same price, so the average revenue remains constant regardless of the level of output.




Flat Shape:
Due to the horizontal nature of the AR curve, it is flat or perfectly elastic in perfect competition. This means that the firm can increase its sales without reducing the price, as long as the market price remains constant.




No Market Power:
The flat AR curve indicates that firms in perfect competition have no market power and must accept the market price as given. This leads to the horizontal shape of the AR curve, reflecting the unique characteristics of perfect competition.
Community Answer
Explain the nature of shape of AR curve of a firm under perfect compet...
AR curve is horizontal straight parallel tox axis because it equals to price .In perfect comp. price remain same because firm is price taker and industry is price maker and no one can influence the price in perfect comp.
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Direction: Read the following passage and answer the question that follows:The slope of a total revenue curve is particularly important. It equals the change in the vertical axis (total revenu e) divided by the change in the horizontal axis (quantity) between any two points. The slope measures the rate at which total revenue increases as output increases. We can think of it as the increase in total revenue associated with a 1-unit increase in output. The increase in total revenue from a 1-unit increase in quantity is marginal revenue. Thus marginal revenue (MR) equals the slope of the total revenue curve.How much additional revenue does a radish producer gain from selling one more pound of radishes? The answer, of course, is the market price for 1 pound. Marginal revenue equals the market price. Because the market price is not affected by the output choice of a single firm, the marginal revenue the firm gains by producing one more unit is always the market price. The marginal revenue curve shows the relationship between marginal revenue and the quantity a firm produces. For a perfectly competitive firm, the marginal revenue curve is a horizontal line at the market price. If the market price of a pound of radishes is $0.40, then the marginal revenue is $0.40. Marginal revenue curves for prices of $0.20, $0.40, and $0.60. In perfect competition, a firm’s marginal revenue curve is a horizontal line at the market price.Price also equals average revenue, which is total revenue divided by quantity. To obtain average revenue (AR), we divide total revenue by quantity, Q. Because total revenue equals price (P) times quantity (Q), dividing by quantity leaves us with price.Q. The slope of the Total Revenue equals ……..

Direction: Read the following passage and answer the question that follows:The slope of a total revenue curve is particularly important. It equals the change in the vertical axis (total revenu e) divided by the change in the horizontal axis (quantity) between any two points. The slope measures the rate at which total revenue increases as output increases. We can think of it as the increase in total revenue associated with a 1-unit increase in output. The increase in total revenue from a 1-unit increase in quantity is marginal revenue. Thus marginal revenue (MR) equals the slope of the total revenue curve.How much additional revenue does a radish producer gain from selling one more pound of radishes? The answer, of course, is the market price for 1 pound. Marginal revenue equals the market price. Because the market price is not affected by the output choice of a single firm, the marginal revenue the firm gains by producing one more unit is always the market price. The marginal revenue curve shows the relationship between marginal revenue and the quantity a firm produces. For a perfectly competitive firm, the marginal revenue curve is a horizontal line at the market price. If the market price of a pound of radishes is $0.40, then the marginal revenue is $0.40. Marginal revenue curves for prices of $0.20, $0.40, and $0.60. In perfect competition, a firm’s marginal revenue curve is a horizontal line at the market price.Price also equals average revenue, which is total revenue divided by quantity. To obtain average revenue (AR), we divide total revenue by quantity, Q. Because total revenue equals price (P) times quantity (Q), dividing by quantity leaves us with price.Q. The marginal revenue curve shows the relationship between ..................... and ......................

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Explain the nature of shape of AR curve of a firm under perfect competition.?
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