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Marginal Revenue and the Demand Curve

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A Special Case of the Demand and Marginal Revenue Curves
Marginal Revenue and the Demand Curve
In the special case of a perfectly competitive market, a producer faces a perfectly elastic demand curve and therefore doesn't have to lower its price at all in order to sell more output. In this case, marginal revenue is equal to price (as opposed to being strictly less than price) and, as a result, the marginal revenue curve is the same as the demand curve.

Interestingly enough, this situation still follows the rule that the marginal revenue curve is twice as steep as the demand curve, since twice a slope of zero is still a slope of zero.

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