This document summarizes and compares the revenue curves under perfect competition and monopoly. Under perfect competition, firms are price takers and the average revenue (AR) curve is flat, as additional units can be sold at the same price. Therefore, the marginal revenue (MR) curve coincides with the AR curve. Under monopoly, there is a single seller who can influence price. Both the AR and MR curves slope downward, as the monopolist must lower prices to sell additional output. The AR curve under monopoly is a rectangular hyperbola, meaning total revenue remains constant at different price points.

1. REVENUE CURVE UNDER:
PERFECT COMPETITION
&
MONOPOLY
Prepared by Noman shah
Email:shah.noman1998@gmail.com

2. • Perfect competition
• Perfect competition is a market structure in which the following five criteria are
• 1) All firms sell an identical product;
• 2) All firms are price takers - they cannot control the market price of their product;
• 3) All firms have a relatively small market share;
• 4) Buyers have complete information about the product ...

3. •Monopoly
• market structure characterized by a single seller, selling a unique product in the
market. In a monopoly market, the seller faces no competition, as he is the sole
seller of goods with no close substitute. ... He enjoys the power of setting the price
for his goods.

4. • (i) Revenue Curve under Perfect competition:
• Perfect competition is the term applied to a situation in which the individual
buyer or seller (firm) represent such a small share of the total business
transacted in the market that he exerts no perceptible influence on the price
the commodity in which he deals.
• Thus, in perfect competition an individual firm is price taker, because the price
is determined by the collective forces of market demand and supply which are
not influenced by the individual. When price is the same for all units of a
commodity, naturally AR (Price) will be equal to MR i.e., AR = MR. The
schedule for a competitive firm is shown in the table .

5. • In table we find that as output increases, AR remains the same i.e. Rs. 5. Total
revenue increases but at a constant rate. Marginal revenue is also constant i.e. Rs. 5
and is equal to AR.
• Thus
• TR = AR x Q
• ADVERTISEMENTS:
• Also TR = MR x Q [Since AR = MR]
• In figure 8, on the X-axis, we take quantity whereas on Y-axis, we take revenue. At
price OP, the seller can sell any amount of the commodity. In this case the average
revenue curve is the horizontal line. The Marginal Revenue curve coincides with the
Average Revenue.
• It is because additional units are sold at the same price as before. In that case AR =
MR. A noteworthy point is that OP price is determined by demand and supply of
industry.

7. • Revenue Curves under Monopoly:
• Monopoly is opposite to perfect competition. Under monopoly both AR and MR
curves slope downward. It indicates that to sell more units of a commodity, the
monopolist will have to lower the price. This can be shown with the help of table 6.

8. • In case of pure monopoly, AR curve can be rectangular hyperbola as has been shown
in Fig. In this situation, a producer is so powerful that by selling his output at different
prices, he can make the consumer spend his income on the concerned commodity. In
this case AR curve is rectangular hyperbola. It implies that TR of the monopolist will
remain same whatever may be the price. Area below each point of AR curve will be
equal to each other. When TR is constant MR curve will be represented by OX-axis as
has been shown in figure 9.

9. The End
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