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RIVAL CONSUMPTION: Consumption of a good by one person imposes a cost on, or prevents consumption of the good by, another person. Some goods, like food, have extremely rival consumption. One person, and only one person, gets the benefit. Other goods, like national defense, have no consumption rivalry, everyone can benefit simultaneously without imposing a cost on others. This is one of the two key characteristics of a good (the other is excludability) that distinguishes between common-property goods, near-public goods, private goods, and public goods.
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                           AVERAGE REVENUE CURVE, MONOPOLISTIC COMPETITION: A curve that graphically represents the relation between average revenue received by a monopolistically competitive firm for selling its output and the quantity of output sold. Because average revenue is essentially the price of a good, the average revenue curve is also the demand curve for a monopolistically competitive firm's output. Monopolistic competition is a market structure with a large number of relatively small firms that sell similar but not identical products. Each firm is small relative to the overall size of the market such that it has some market control, but not much. In other words, it can sell a wide range of output at a narrow range of prices. This translates into a relatively elastic demand curve. If a monopolistically competitive firm wants to sell a larger quantity, then it must lower the price.The average revenue curve reflects the degree of market control held by a firm. For a perfectly competitive firm with no market control, the average revenue curve is a horizontal line. For firms with market control, such as monopolistic competition, the average revenue curve is negatively-sloped. Average Revenue Curve,
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The average revenue curve for Manny Mustard is displayed in the exhibit to the right. Key to this curve is that Manny Mustard is a monopolistically competitive seller of sandwiches and thus faces a negatively-sloped demand curve. Larger quantities of output are only possible with lower prices.The vertical axis measures average revenue and the horizontal axis measures the quantity of output (number of sandwiches). Although quantity on this particular graph stops at 10 sandwiches, it could go higher. This curve indicates that if Manny Mustard sells 1 sandwich (at $5.20 per sandwich), then average revenue is $5.20 per sandwich. Alternatively, if he sells 10 sandwiches (at $4.75 per sandwich), then average revenue in is $4.75 per sandwich. For Manny Mustard the average revenue curve is also the demand curve. The curve is negatively sloped, meaning that larger quantities of output result in less average revenue. Although this average revenue curve, and preceding table of average revenue numbers, is based on the production activity of Manny Mustard, a well-known monopolistically competitive firm, they apply to any firm with market control. Monopoly and oligopoly firms that also face negatively-sloped demand curves generate comparable average revenues.
Recommended Citation:AVERAGE REVENUE CURVE, MONOPOLISTIC COMPETITION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 18, 2025].
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Today, you are likely to spend a great deal of time wandering around the downtown area trying to buy either shoe laces for your snow boots or a rim for your spare tire. Be on the lookout for the happiest person in the room.
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