GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In monopoly, the relationship between average revenue and marginal revenue curves is as follows:
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AR curve is parallel to the MR-curve
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AR curve lies below the MR-curve
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AR curve coincides with the MR-curve
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Average revenue curve lies above the MR-curve
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Explanation:
Detailed explanation-1: -This relationship between the marginal and average revenue of a monopoly firm is stated as follows: AR and MR are both negative sloped (downward sloping) curves. MR curve lies half-way between the AR curve and the Y-axis. i.e. it cuts the horizontal line between the Y-axis and AR into two equal parts.
Detailed explanation-2: -Under perfect competition, the average revenue curve of a firm is parallel to the X-axis, whereas under monopoly it is negatively sloped.
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