Explain why in theory in pure competition price=D=MR=AR in the short run

Question

Explain why in theory in pure competition price=D=MR=AR in the short run

Answer 1

As in perfect competition there are large (unlimited) number of buyers and sellers and this mean that the firm doesnot need to decrease the price in order to increase the demand. it only needs to produce more and it will be  demanded without lowering the price this means that the firm, is facing perfectly elastic curve and the Demand curve is average revenue curve. and as i said that the price need not be changed to increase the demand hence P=MR=AR=D represented with a perfectly flat curve

Answer 2

In perfect competition, all firms are assumed to produce the exact same product (homogeneity of goods). This means that each firm has to take the market price for its goods or it will not be in business (higher than market price: consumers switch to another producer's goods, lower than market price: costs exceed revenue and the firm goes out of business). This means that each firm in a perfectly competitive market faces a perfectly elastic (horizontal) demand curve.

With respect to the MC=AR aspect: there are assumed to be no economies of scale in a perfectly competitive market, so the cost of producing an additional good (MC) is the price received from the consumer (AR).