Question

If the average revenue curve is a horizontal straight line then what will be the marginal revenue curve?

• A. Downward sloping
• B. Horizontal straight line
• C. Upward sloping
• D. Inversely S-shaped

Hint:

In perfect competition, both the average revenue and marginal revenue curves are horizontal, reflecting the constant price at every level of output.

Answer 1

The Correct Option is B

Step 1: Understanding Average Revenue and Marginal Revenue:
In a perfectly competitive market, the average revenue (AR) is equal to the price of the good, which is constant at every level of output. This means the AR curve is horizontal.
Step 2: Relationship between AR and MR:
Marginal revenue (MR) is the additional revenue generated by selling one more unit of a good. In perfect competition, since the price is constant for every additional unit sold, the MR curve coincides with the AR curve.
Step 3: Conclusion:
Given that the AR curve is a horizontal straight line, the MR curve will also be a horizontal straight line, as MR is equal to AR in perfect competition.