Under imperfect competition, Average Revenue (AR) remains __above__
Marginal Revenue (MR).
Marginal revenue is the addition to total revenue by selling one more unit of the commodity. Average revenue is the revenue per unit of the commodity sold. Unlike under perfect competition, a firm under imperfect competition such as under monopoly can sell more only by lowering its price. Therefore, the average revenue curve is downward sloping and its corresponding marginal revenue curve lies below it.
‘‘For a firm to be in equilibrium, Marginal Revenue (MR) and Marginal Cost (MC) must be equal and beyond that level of output Marginal
Cost must be higher.’’
Conditions for a firm to be in equilibrium:
- Marginal cost should be equal to marginal revenue.
- Its profit should be maximum.
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