Question

Comment on the shape of the MR curve in case the TR curve is a

1. positively sloped straight line

2. horizontal straight line

Answer 1

(i) Based on the relationship between MR and TR it can be said that when TR curve is a positively sloped straight line, then MR curve is a horizontal line. MR and demand curve are the same, and the price (AR) remains constant for different output levels. This happens under perfect competition.

(ii) When TR curve is a horizontal straight line, then MR is zero. Therefore, MR curve is also a horizontal straight line and coincides with the output-axis.