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First, we understand the meaning of Average Revenue and Marginal Revenue.

Average revenue refers to revenue per unit of output sold. AR = TR / Q.

Where,

AR = Average Revenue

TR = Total Revenue

Q = Total output sold.

Average revenue is equal to price.

Marginal revenue refers to change in total revenue when output and sales volume is changed by one unit. It is addition to total revenue when output is increased by one unit.

As we know that Perfect competition is a market situation in which each seller is so small relative to the entire industry that he cannot affect market price by changing his output. He has no control over market price. He must accept the price that currently prevails in the market. He can reduce price, but this is neither necessary nor desirable. At current market price, he can only sell as much as he wishes.

The market equilibrium as shown in figure-1 is in a perfectly competitive industry. Market demand is indicated by D and market supply by S. Both intersection decides market equilibrium price OP and equilibrium quantity OQ. Here, the demand curve faced by an individual producer of firm in this industry as shown in figure-2 as a horizontal line at the level of market equilibrium price. It is noted as D = AR = MR. The horizontal line at the level of market equilibrium price. It clearly indicates that he can sell nothing at a price higher than OP and can sell any amount at OP price. It is the average revenue curve.

A producer under perfect competition can sell additional units the product without reducing price, his total revenue increases by the same amount as price.

It means, when price seems constant, marginal revenue is equal to price or average revenue as no loss is incurred on previous units in this case. Figure-2 shows, the horizontal demand curve facing a producer is noted as MR also. 

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