Question

On the basis of given diagram, answer the following questions :
(i) Indicate, whether price will fall or remain same with rise in output.
(ii) What does the shaded are OPRQ indicate ?
(iii) What will be the nature of MR curve ?

Answer 1

(i) Perfectly elastic demand curve in the given diagram indicates that price will remain same at all output levels.
(ii) The shaded are OPRQ indicates TR as area under
Price line (AR curve) is equal to TR.
(iii) MR curve will coincide with AR curve, i.e. both AR and MR curves coincide in a horizontal straight line parallel to the X-axis.