Question

For a perfectly competitive firm, the average revenue, price, marginal revenue are equal, while for a monopolistically competitive firm only price and average revenue are equal.

Select one:

True

False

Answer 1

TRUE

Under perfect competition, the demnad curve is horizontal and P = MR = AR

But in monopolistic competition, the demand curve (AR curve) and the MR curve are both downward sloping and equilibrium occurs when MR = MC

We see a corresponding price on the demand curve where P = AR which gives the equilibrium price level.

So, P = AR but not equal to MR in monopolistic competition.

Statement is correct

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