Q.Show how a firm's marginal revenue and average revenue are related when the market price remains unchanged.

For a price-taking firm, average revenue and marginal revenue are both equal to the constant market price, so AR = MR (a horizontal line).

A price taker cannot influence the market price by changing how much it sells — it can sell any quantity it wishes at the price determined by overall market demand and supply. This means the firm's own demand curve is a horizontal straight line at the market price (P).

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Blank 1: Monopoly market. Blank 2 (Or): less (than price).

Fill in the blank 1: In a Monopoly market, the seller — being the sole supplier with no competitors — determines the price of their own product; the monopolist is a 'price maker', unlike a perfectly competitive firm which is a 'price taker'.

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The necessary condition for profit maximisation is MR = MC, option (a).

A firm's profit is total revenue (TR) minus total cost (TC). Profit is maximised at the output where the ADDITIONAL revenue from producing one more unit (marginal revenue, MR) exactly equals the ADDITIONAL cost of producing that unit (marginal cost, MC). This is the first-order (necessary) condition for profit maximisation, applicable to a firm under ANY market structure (perfect competition, monopoly, or anything in between) - it is a general principle of optimisation: as long as MR exceeds MC, producing one more unit adds to profit, so the firm keeps expanding output; once MC exceeds MR, producing less raises profit. The equality MR = MC is thus where profit stops increasing and is at its …

Both statements are False — monopoly AR exceeds MR (they are not equal), and short-run profit under monopolistic competition is not restricted to 'normal profit only'.

Monopoly: is AR always equal to MR? False. A monopolist faces the entire (downward-sloping) market demand curve as its AR curve. To sell an additional unit, it must lower the price on ALL units sold, not just the extra one — so the revenue added by the last unit (MR) is always LESS than the price/AR at which it is sold (except, in the limiting case, at zero output, where MR equals AR). Hence MR < AR throughout, they are never equal (unlike under perfect competition, where AR = MR).

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