Q.Distinguish between Average Revenue and Marginal Revenue under perfect competition and under monopoly.

AR and MR behave differently depending on whether the firm faces a flat or a downward-sloping demand curve.

Under perfect competition, the firm is a price taker facing a perfectly elastic (horizontal) demand curve at the ruling market price. Since every additional unit is sold at the same unchanged price, Average Revenue and Marginal Revenue are identical to price at every level of output: $AR = MR = P$, both shown as the same horizontal straight line.

Under monopoly (and other imperfect market forms), the firm faces the entire downward-sloping market demand curve, so it must lower the price on all units sold — not merely the extra unit — in order to sell more. Consequently, Average Revenue (price) falls as output rises, but Marginal Revenue falls faster than Average Revenue, lying below the AR curve at every output beyond the first unit. If demand is inelastic at some output …

A common mistake is assuming MR always equals AR just because both fall together under monopoly — MR falls faster, and confusing 'both are downward slop …