Question

5. In the situation of fall in marginal revenue, what changes occur in total revenue? Explain with diagram. ​

Answer 1

Explanation:

Marginal revenue is the change in total revenue when one more unit of a commodity is sold.

MR= change in TR/change in quantity sold

Average revenue refers to revenue per unit of output.

AR=TR/Q

Relationship between AR and MR:

a) When AR is decreasing, MR should be decreasing faster than AR. Thus, downward sloping MR curve is below the downward sloping AR curve(a situation of monopoly and monopolistic competition)Image result for AR MR CURVE UNDER

b) If AR is constant, MR is equal to AR. Both are indicated by the same horizontal straight line(a situation of perfect competition)Image result for AR MR CURVE UNDER

c) MR can be negative, but not AR.

Answer 2

Answer:

marginal revenue is the change in total revenue when one more unit of a commodity is sold.

MR = change in TR/ change in quantity sold

Average revenue refers to revenue per unit of output

AR = TR/Q

Relationship between AR and MR :

a) when AR is decreasing ,MR should be decreasing faster than AR. thus, downward sloping M curve is below the downward sloping AR curve.

b) if AR is constant ,MR is equal to AR .both are indicated by the same horizontal straight line.

c) MR can be negative but not AR.