What are the differences between the Market Demand and Market Marginal Revenue curves and a Single...

What are the differences between the Market Demand and Market Marginal Revenue curves and a Single Firms Demand Curve and Marginal Revue Curve? What causes these differences? What is the Quantity the firm can sell?

Expert Solution

A demand curve is the average revenue curve (if it is for a market then market average revenue and if it is for a single firm then firm average revenue) whereas the marginal revenue curve (if it is for a market then market marginal revenue and if it is for a single firm then firm marginal revenue) shows the additional revenue a firm can get by selling an extra unit of a good.

Now, the difference between a market demand curve and a single firms demand curve is that a single firms demand curve is the average revenue the firm gets by selling any quantity of a good whereas the market demand curve shows the average revenue of all the firms present in the market. That is a market demand curve comprises of all the firms present in the market.

Similar explanation follows for the marginal revenue curve as well. That is a single firms Marginal revenue curve shows the marginal revenue for that firm only whereas a market marginal revenue curve shows the marginal revenue for all the firms present in the market.

The main cause of the difference is the number of firms. More will be the number of firms in the market more will be the difference between the two curves.

The equilibrium quantity of a firm is calculated by equating the firms demand curve with the firms marginal cost. That is the quantity at which the demand curve intersects the marginal cost curve is the equilibrium quantity for that firm.

Rahul Sunny answered 3 weeks ago

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