Question

Draw in a single diagram the average revenue and marginal revenue curves of a firm which can sell any quantity of the goods at a given price. Explain.

Answer 1

In such a market whether the firm sells more or less, it does not affect the market price. It makes the AR curve parallel to the X-axis so that whether quantity produced is OQ₁ and OQ₂ market price remains unchanged. Since AR is unchanged, AR must be equal to MR. The MR curve thus coincides with the AR curve.