Draw AR and MR curves under perfect competition in a single diagram.

AR and MR Curves in Perfect Competition.

Both AR and MR curves are a horizontal straight line parallel to x-axis as shown in fig.

As explained above, industry is the price maker and the firm price taker. Every firm has to accept the price as determined by the industry. At this price (र 6 in the schedule), a firm can sell as much as it wants to sell. This means with sale of every additional unit of the commodity, additional revenue (i.e. MR) and average revenue (AR) will be equal to price. Price = AR = MR. As a result firm's AR and MR curves will be a horizontal straight line parallel to x-axis. Since AR equals price, therefore, AR curve is also said to be price line.

Under perfect competition AR curve is parallel to x-axis because AR is equal to price and remains constant.