revenue nor average revenue varies with output. In the table, marginal
revenue is shown between the rows because it represents the change
total revenues in response to a change in quantity. When price is constant,
total revenue (which is price times quantity) is an upward-sloping straight
line starting from the origin.
The important point illustrated in the table is that as long as the firm’s
own level of output cannot affect the price of the product it sells, then the
firm’s marginal revenue is equal to its average revenue. Thus, for a price-
taking firm, Graphically, as shown in part (i) of Figure
9-2 , average revenue and marginal revenue are the same horizontal line
drawn at the level of market price. Because the firm can sell any quantity
it chooses at this price, the horizontal line is also the firm’s demand
curve; it shows that any quantity the firm chooses to sell will be
associated with this same market price.
For a competitive price-taking firm, the market price is the firm’s marginal (and average)
revenue.AR=MR=price.