Explain the average and marginal revenue curve of a firm under perfect compitition and monopoly.

Dear Student,

Under a perfectly competitive market, an individual faces a horizontal demand curve of a product. This demand curve represents AR and MR curve. That is, in other words the Average Revenue curve and Marginal Revenue curve are the same under perfect competition firm and are drawn as the horizontal line parallel to X-axis.

In case of Monopoly, Both the AR and MR curves are downward sloping because the extra amount of commodity can only be sold at reduced prices. Also the curves under monopoly are less elastic due to no availability of close substitutes.

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