Вопрос: What Is AR Curve?

Why is Mr downward sloping?

Graphically, the marginal revenue curve is always below the demand curve when the demand curve is downward sloping because, when a producer has to lower his price to sell more of an item, marginal revenue is less than price..

What is the relationship between AR and MR?

Under monopolistic competition, the relationship between AR and MR is the same as under monopoly. But there is an exception that the AR curve is more elastic, as shown in Figure 6. This is because products are close substitutes under monopolistic competition. The firm can increase its sales by a reduction in its price.

What is average revenue formula?

It can also be said that it is the revenue that is obtained by the seller on selling each unit of the commodity. Average revenue of a business is obtained by dividing the total revenue with the total output.

What is average cost and average revenue?

Average Cost Average Revenue (AR) refers to total revenue per unit of output sold. Average Cost (AC) refers to total cost of production per unit. It is obtained by dividing the total revenue by the number of units sold. It is calculated by dividing total cost by total quantity of production.

Can the AR curve lie in the negative axis?

AR is also the price of the output. SInce price can never be be negative AR curve cannot lie in the negative axis.

Why AR is called price?

Average revenue (AR), is revenue per unit, and is found by dividing TR by the quantity sold, Q. AR is equivalent to the price of the product, where P x Q/Q = P, hence AR is also price.

Why the AR and MR curves are two different curves?

MR (Rs.) In Table 7.4, both MR and AR fall with increase in output. However, fall in MR is double than that in AR, i.e., MR falls at a rate which is twice the rate of fall in AR. As a result, MR curve is steeper than the AR curve because MR is limited to one unit, whereas, AR is derived by all the units.

When Ar is falling MR will be?

Under imperfect competition, when AR falls, MR also falls and it is always below AR line because there are large numbers of buyers and sellers, products are not homogeneous and the firms can enter or exit the market. It can be shown with the help of a table 3.

What does AR mean in economics?

Average RevenueRevenue is the income generated from the sale of goods and services in a market. Average Revenue (AR) = price per unit = total revenue / output. The AR curve is the same as the demand curve. Marginal Revenue (MR) = the change in revenue from selling one extra unit of output.

What is the relationship between average cost and marginal cost?

Relationship Between Average and Marginal Cost When the average cost increases, the marginal cost is greater than the average cost. When the average cost stays the same (is at a minimum or maximum), the marginal cost equals the average cost.

What happens if AR is not constant?

If AR is not constant then it will not equal to the MR as well as it will also affect the perfect conditions of MR.

What curve is the AR curve equivalent to?

The demand curve equals the average revenue curve in all cases. This makes sense if you think about what average revenue is, it’s just the total revenue divided by quantity sold, and the price and quantity are both taken from the demand curve.

What is the shape of AR and MR curve under monopoly?

1. Under perfect competition, average revenue curve is a straight horizontal line and is equal to MR. 2. In pure monopoly, AR curve is a rectangular hyperbola and MR curve coincides with the horizontal axis.

Why AR is equal to price?

Average Revenue is the per unit revenue (price) received from the sale of one unit of a commodity. Hence, it is proved that, AR = Price. …

Why is Mr below ar?

The truth is that MR is less than p or AR in monopoly. This is so because p must be lowered to sell an extra unit. … In contrast, the monopoly firm is faced with a negatively sloped demand curve. So, it has to reduce its p to be able to sell more units.

Why AR curve is called demand curve?

Average revenue is called demand curve. This is because average revenue curve shows different quantities of output that the firm can sell at different prices which is the same as demand for the output at different price levels.