
40 Chapter 3
What is much more important in the analysis of equilibrium of a monopoly rm is the relationship
between the AR and MR curves. When price is xed, as in case of perfect competition, rm’s demand
curve takes the form of a horizontal line. In that case, AR = MR and MR is a straight line too. But, in case
of a monopoly rm, demand curve has a negative slope. erefore, its MR curve too has a negative slope.
ere is, however, a specic relationship between AR and MR, i.e., the slope of MR curve is twice that of
that AR curve. at is, given the linear demand function, marginal revenue curve is twice as steep as the
average revenue cur ...