The Theory Of The Firm Under Perfect Competition

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Total Revenue (TR): refers to the total amount of money received by the firm from the sale of its products.
               TR = Price x output.
Average Revenue (AR): is the revenue per unit of the output.
                        AR = TR/Q
                             = P x Q/Q = P
Marginal Revenue (MR): is defined as the change in total revenue when one extra unit is sold. i.e. it is the revenue obtained from one extra or last unit sold. For a price-taking firm, marginal revenue equals the market price.

Relationship between TR, AR and MR:
Under perfect competition, TR is an upward sloping an straight line starting from the origin and rises at a constant rate, i.e., proportional to increase in output. Here, AR and MR are identical and remain constant.