1.

What is the relation between market price and average revenue of a price taking firm?

Answer»

Average Revenue is defined as the revenue per unit of the output sold. It is expressed as the ratio between total revenue and the output sold.

AR = TR/Q

We know that,
TR = P × Q

AR = (P x Q)/Q
AR = P
Thus, the market price and the average revenue are the same for a perfect competitive firm.



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