Q3 of 27 Page 66

What is the ‘price line’?

Priceline is the graphical representation of the relationship between the quantity of output sold and its price. It is a horizontal straight line in case of perfectly competitive market where price is equal to average revenue and marginal revenue.



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1

What are the characteristics of a perfectly competitive market?

 2

How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?

 4

Why is the total revenue curve of a price-taking firm an upward-sloping straight line? Why does the curve pass through the origin?

 5

What is the relation between market price and average revenue of a price taking firm?