Revenue Curve of an Individual Firm Under Imperfect Competition:
Under imperfect competition,
whether it may take the form of monopoly, duopoly or oligopoly,
the
demand curve facing the firm is negatively inclined or we
can say its slopes downward from left to right. This means that
a firm can affect the market price and can sell more goods at
lower prices and less at a higher price.
Under imperfect
competition, the behavior of MR curve is that it lies
below the AR curve. As production expands, the distance between
the two curves increases. The AR line and the price line is the
same as is clear from the schedule given below:
Schedule:
| Units
Sold |
Price
($) |
Total Revenue ($) |
Marginal Revenue ($) |
Average Revenue ($) |
| 1 |
15 |
15 |
15 |
15 |
| 2 |
14 |
28 |
13 |
14 |
| 3 |
12 |
36 |
8 |
12 |
| 4 |
9 |
36 |
0 |
9 |
| 5 |
7 |
35 |
-1 |
7 |
| 6 |
5 |
30 |
-5 |
5 |
Diagram/Figure:
lt is clear from the above figure
(14.4) that
average revenue curve and marginal revenue curve both have a
negative slope. MR curve lies below the AR curve because the
output is solid at the
falling prices.
Relevant Articles:
|
