Question

In which market Marginal Revenue may become Zero or
Negative?
A. Monopoly
B. Monopolistic Competition
C. Both A and B
D. Perfect Competition​

Answer 1

Answer:

Marginal revenue in monopoly

Explanation:

1. When a firm faces a downward-sloping demand curve, then marginal revenue will be less than average revenue and can even be negative. This is because, if a firm cuts price, it gets a lower average price but also loses revenue it could otherwise have made from selling units at a higher price.

Answer 2

C. Both A and B

Monopoly, Monopolistic Competition market Marginal Revenue may become Zero or Negative.

• For a company with some market strength, marginal revenue might be both zero and negative. Total revenue for a completely competitive firm (a firm without market power) is a favourably sloping straight line beginning at the origin. Total revenue is unaffected if marginal revenue is zero. Entire revenue (TR) is the total amount made from selling all of the products that businesses manufacture. It is determined as the sum of the output's total quantity sold (Q) and the market price (P).
• If marginal revenue is negative, more units sold result in lower overall revenue. This might occur as a result of a business having to lower pricing in order to sell those extra units.
• The private gain from selling an additional unit of output is the marginal revenue for a monopolist. The additional benefit from raising the quantity supplied is less than the decided market price, and the marginal revenue curve has a downward slope and is below the demand curve.
• When the change in output exceeds the change in price, MR is positive. When the price change exceeds the output change, the MR is negative.

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