microecon question (1 Viewer)

[W.A.Mozart]

In perfect competition, why does AR=Demand for the firm?

 

[seremify007]

Sorry I'm so not in the mood to answer this. Try asking on your uni forums or...

http://en.wikipedia.org/wiki/Perfect_competition

 

[Zarathustra]

Isn't it because demand is perfectly elastic, so that any point on the demand curve will be the same price and so always the average revenue? That a horizontal demand curve will always equal AR - because it's just the average of the same number on that horizontal line...

 

[Conspirocy]

its simple, as the big bob conlon said from unsw

since no firm has the ability to influence the market in perfect competition they cannot set the price

they are price takers - so they can supply as much or as little as they want at the market price - hence a horizontal demand curve where AR=D=P

have a nice day