Q6. What is relationship between TR and MR when price falls with rise in output?
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Explanation:
Relationship between TR and MR (When Price Falls with rise in output): When more of output can be sold only by lowering the price, then revenue from every additional unit (i.e. MR) will fall. MR is the addition to TR when one more unit of output is sold.
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The relation between marginal revenue and total revenue, when the price falls with rising in output is that the total revenue increases, but the marginal revenue keeps decreasing.
- The marginal revenue is the addition to the total revenue when one more additional product is sold.
- When the rise in sales is with the fall in the price of the product, the total revenue keeps increasing but the marginal revenue decreases due to the fall in price with rising in sales.
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