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Doctors Medicines MCQs Q&A

What is the relation between market price and average revenue of a price taking firm?

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1 Answers

Average Revenue is defined as the revenue per unit of the output sold. It is expressed as the ratio between total revenue and the output sold.

AR = TR/Q

We know that,
TR = P × Q

AR = (P x Q)/Q
AR = P
Thus, the market price and the average revenue are the same for a perfect competitive firm.

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