Question

Explain relation between TR AND MR by making numerical example(diagram too)​

Answer 1

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 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.