Question

Describe the relation between average revenue and marginal revenue

Answer 1

(i) if AR is constant, AR=MR

(ii) if AR is diminishing, AR>MR

(iii) MR can be negative, but not AR. Average revenue refer to price per unit of the commodity which can never be negative.

Answer 2

Answer:

The relationship between average revenue and marginal revenue is the same as between any other average and marginal values. When average revenue falls marginal revenue is less than the average revenue. When average revenue remains the same, marginal revenue is equal to average revenue.