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Assuming that the firm is a price taker, its marginal revenue curve is always equal to

Assuming that the firm is a price taker, its marginal revenue curve is always equal to

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Answer #1

Marginal revenue is the change in total revenue due to selling additional one unit of output.

When a firm is a price taker, for an additional unit of output it charges the price prevailing in the market,so, for a price taker firm, marginal revenue is equals to price prevailing in the market.

When a firm is a price taker, its marginal revenue is equals to price. For a price taker firm such as one in a perfectly competitive market sales all units of output at the same price prevailing in the market. For such a price taker firm, the demand curve is horizontal, perfectly elastic. Also price is equals to average revenue,so, both average revenue and the demand curve are same.

Hence, For a price taker firm, marginal revenue curve is equals to the demand curve, the average revenue curve and the price line.

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