Why is total revenue curve facing a competitive firm straight line passing through origin?
Dear Student,
In a perfect competition, the price of product remains constant i.e. for selling additional units of output a firm need not to reduce its product's price. As the price remains same at all levels, the average revenue as well as marginal revenue also remain constant and equal to price i.e.
However, Total revenue changes with a change in output, so with increase in output total revenue also increases at constant rate. TR curve in competitive market is straight line as P = AR = MR and are constant, and it passes through origin because at zero output level TR is also zero.
Regards
In a perfect competition, the price of product remains constant i.e. for selling additional units of output a firm need not to reduce its product's price. As the price remains same at all levels, the average revenue as well as marginal revenue also remain constant and equal to price i.e.
PRICE= AVERAGE REVENUE= MARGINAL REVENUE
However, Total revenue changes with a change in output, so with increase in output total revenue also increases at constant rate. TR curve in competitive market is straight line as P = AR = MR and are constant, and it passes through origin because at zero output level TR is also zero.
Regards