Multiple choice

Under which market structure, average revenue of a firm is equal to its marginal revenue?

  1. Oligopoly

  2. Monopoly

  3. Perfect competition

  4. Monopolistic competition

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In perfect competition, firms are price takers and sell each unit at the same market price. Therefore, AR (average revenue) = MR (marginal revenue) = Price. In other market structures, AR > MR because firms must lower price to sell more units.