Average revenue and marginal revenue are equal at each output level in
A) pure competition.
B) monopolistic competition.
C) monopoly.
D) oligopoly.

Question

Quizplus · Accepted Answer

In pure competition, there are a large number of firms producing identical products, and there is easy entry and exit into the market. Therefore, each firm is a price-taker and has no influence on the market price. As a result, the demand for the firm's output is perfectly elastic, which means that the average revenue (AR) and marginal revenue (MR) are equal at each output level. In other market structures like monopolistic competition, monopoly, or oligopoly, the firms have some degree of market power and can influence the price, so the AR and MR will not be equal at every output level.

Average Revenue and Marginal Revenue Are Equal at Each Output