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Average Revenue (AR) can be defined as revenue per unit of output. Therefore, from the aforementioned equation, it can be said that AR is the rate at which output is sold, where rate refers to the price of the product. Hence, it can be said that AR is nothing, but price of the product.
So the net increase in revenue was the $9.95 minus the $5.00, or $4.95. There is a another way to see why marginal revenue will be less than price when a demand curve slopes downward. Price is average revenue. If the firm sells 100 for $10.00, the average revenue for each unit is $10.00. For a perfectly competitive firm with no market control, the marginal revenue curve is a horizontal line. Because a perfectly competitive firm is a price taker and faces â¦ a horizontal demand curve, its marginal revenue curve is also horizontal and coincides with its average revenue (and demand) curve.