Draw a marginal revenue curve of a perfectly competitive firm and explain why the marginal revenue of a perfectly competitive firm is always equal to its average revenue.

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Solution

Marginal revenue is the change in total revenue when one more unit of a commodity is sold.
MR= change in TR/change in quantity sold
Average revenue refers to revenue per unit of output.
AR=TR/Q
Relationship between AR and MR:
If AR is constant, MR is equal to AR. Both are indicated by the same horizontal straight line(a situation of perfect competition)

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