Question

H) Compare the individual demand curve and marginal revenue curve for company under perfect competition as well as monopoly.

I would be greatly appreciated if the answer is in 5sentences and by your own thank you.

Answer 1

In the perfect competition the demand curve is also the marginal revenue curve of the firm , this is because the the firms are selling identical products and they are price takers. Because of they are selling the identical products the price cannot be influenced by any firm in the market. If any any one firm raises the prices he would loose all of his sales and this proves that the demand curve in the perfect competition is perfectly elastic that is a slight change in the price leads to sales to the zero. The demand curve in the perfect competition is horizontal straight line shows the perfect elastic demand.

In the monopoly the demand curve is downward sloping and this shows the negative relationship between the price and the quantity demanded. The elasticity varies along the demand curve, the marginal revenue curve of the monopoly falls below the demand curve this is because the monopolist will have to reduce the price for increasing his sales.