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Question
Under what market condition does Average Revenue always equal Marginal Revenue? Explain.
Solution
Under the perfect competition market, AR is equal to MR at all levels of output. Individual buyers cannot influence the market price of a good by varying their demands, and an individual buyer is a price taker and not a price maker. Hence, AR = MR and price will remain the same. The MR curve is a straight horizontal line which is parallel to the X-axis and coincides with the AR curve.
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