Average Revenue or Price and Marginal Revenue are identical

Average Revenue or Price and Marginal Revenue are identical...

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Since Average Revenue or Price and Marginal Revenue are identical, when the former is constant the latter is also constant. Moreover, the Average Revenue curve of a firm is the same as the individual demand curve. Hence, the competitive demand curve is a horizontal straight line parallel to the OX axis. This has been shown in Figure 31. The quantity of Output produced and sold is shown on the OX axis and Price is measured along the OY axis. Competitive market price OP is given and fixed for an individual firm. At this price the
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Unformatted text preview: firm has freedom to produce any small or large quantity such as Q1, Q2, Q3 etc. The firm cannot charge a higher or lower price than the OP. If it attempts to charge a somewhat higher price like OP1 assuming competition, the firm will be able to sell nothing. On the other hand, if it charges a somewhat lower price OP2 the firm will unnecessarily suffer losses....
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This note was uploaded on 11/26/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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