Question:
Under perfect competition market situation, the marginal revenue (MR) line coincides with the:
Under perfect competition market situation, the marginal revenue (MR) line coincides with the:
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Exam Tip: In perfect competition, \(P = AR = MR\). This is a fundamental relationship. For any other market structure (monopoly, oligopoly), \(MR < AR\) because the firm faces a downward-sloping demand curve.
Updated On: Aug 27, 2026
- MC curve
- AR curve
- OC curve
- TR curve
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The Correct Option is B
Solution and Explanation
Step 1: Understanding the Concept:
This question tests the relationship between revenue concepts under different market structures. In perfect competition, the firm is a price taker.
Step 2: Analyzing Revenue Curves under Perfect Competition:
Under perfect competition, the firm faces a horizontal demand curve at the prevailing market price.
This means:
• Average Revenue (AR): AR is the price per unit. Since the price is constant, AR is equal to the market price. The AR curve is a horizontal line.
• Marginal Revenue (MR): MR is the additional revenue from selling one more unit. In perfect competition, each additional unit is sold at the same price. Therefore, MR is also equal to the market price.
• Since AR = Price and MR = Price, we have \(AR = MR\). Therefore, the MR curve coincides with the AR curve. Both are the same horizontal line.
Step 3: Evaluating Other Options:
• (A) MC curve: The MC curve intersects the MR curve at the profit-maximizing output level, but it does not coincide with it.
• (C) OC curve: Opportunity cost curve is not a standard term in this context.
• (D) TR curve: Total Revenue is a linear upward-sloping curve, not a horizontal line.
Step 4: Final Answer:
Under perfect competition, the MR curve coincides with the AR curve. Therefore, option (B) is correct.
This question tests the relationship between revenue concepts under different market structures. In perfect competition, the firm is a price taker.
Step 2: Analyzing Revenue Curves under Perfect Competition:
Under perfect competition, the firm faces a horizontal demand curve at the prevailing market price.
This means:
• Average Revenue (AR): AR is the price per unit. Since the price is constant, AR is equal to the market price. The AR curve is a horizontal line.
• Marginal Revenue (MR): MR is the additional revenue from selling one more unit. In perfect competition, each additional unit is sold at the same price. Therefore, MR is also equal to the market price.
• Since AR = Price and MR = Price, we have \(AR = MR\). Therefore, the MR curve coincides with the AR curve. Both are the same horizontal line.
Step 3: Evaluating Other Options:
• (A) MC curve: The MC curve intersects the MR curve at the profit-maximizing output level, but it does not coincide with it.
• (C) OC curve: Opportunity cost curve is not a standard term in this context.
• (D) TR curve: Total Revenue is a linear upward-sloping curve, not a horizontal line.
Step 4: Final Answer:
Under perfect competition, the MR curve coincides with the AR curve. Therefore, option (B) is correct.
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