Which of the following statement (s) is/are correct?

Statement 1: The average revenue ( AR ) of a firm is defined as total revenue per unit of output.

Statement 2: For a price-taking firm, average revenue equals the market price.

Both statements are correct.

The correct answer is Option 3: Both statements are correct.

Statement 1: The average revenue (AR) of a firm is defined as total revenue per unit of output. Correct.

The formula for Average Revenue (AR) is:AR=TR/Q

where TR (Total Revenue) = Price × Quantity (P × Q). Since AR is TR divided by Q, it represents the revenue earned per unit of output.

Statement 2: For a price-taking firm, average revenue equals the market price. Correct. In a perfectly competitive market, the firm is a price taker, meaning that price (P) remains constant.

Since TR = P × Q, dividing both sides by Q gives:

AR =TR/Q= P*Q/Q = P