In a perfectly competitive market, the average revenue curve of a firm is

Question

Quizplus · Accepted Answer

In a perfectly competitive market, each firm faces a horizontal demand curve, which is also equal to its average revenue (AR) curve. Therefore, option B is correct. Option A is incorrect because the total revenue curve can be found by multiplying the price (which is constant in a perfectly competitive market) by the quantity sold, and it is different from the AR curve. Option C is incorrect because economic profits depend on both revenue and costs and are not related to the AR curve. Option D is incorrect because the difference between TR and MR is constant (i.e., the price) in a perfectly competitive market, and it is not equal to the AR curve.

In a Perfectly Competitive Market, the Average Revenue Curve of a Firm