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Why average revanue is equal to marginal revanue in imperfect competiton?
Wiki User
∙ 13y ago
Average Revenue (AR) is equals to Marginal Revenue (MR) in Perfect competition (PC) not imperfect competition.
AR can be derived from the formula= Total revenue(TR) / Quantity.
Since TR = Price x Quantity, the formula now will be Price x Quantity/ Quantity and naturally, AR equals to Price.
Marginal Revenue can be measured by the formula= Change in total revenue/ Change in quantity (which is 1). Since the change in total revenue will be equals to the price of the product, MR in this case will be the Price of the product.
From here we can see that Price = MR = AR = Demand.
Wiki User
∙ 13y ago
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