Question

when elasticity of demand is equal to one in monopoly, marginal revenue will be......

Answer 1

Answer:

follow it

Explanation:

A Monopoly price is set by a Monopoly.[1][2] A monopoly occurs when a firm lacks any viable competition, and is the sole producer of the industry's product.[1][2] Because a monopoly faces no competition, it has absolute market power, and thereby has the ability to set a monopoly price that will be above the firm's marginal (economic) cost.[1][2] Since marginal cost is the increment in total (economic cost) required to produce an additional unit of the product, the firm would be able to make a positive economic profit if it produced a greater quantity of the product and sold it at a lower price.[1]

The monopoly will ensure a monopoly price will exist when it establishes the quantity of the product it will sell.[1] As the sole supplier of the product within the market, its sales establish the entire industry's supply within the market, and therefore the monopoly's production and sales decisions can establish a single monopoly price for the industry without any influence from competing firms.[1][2][3] The monopoly will always consider the demand for its product as it considers what price is appropriate; such that it will choose a production supply and price combination that will ensure a maximum economic profit.[1][2] It does this by ensuring the marginal cost (determined by the firm's technical limitations that form its cost structure) is the same as the marginal revenue (as determined by the impact a change in the price of the product will impact the quantity demanded) at the quantity it decides to sell.[1][2] The marginal revenue is solely determined by the demand for the product within the industry, and is the change in revenue that will occur by lowering the price just enough to ensure a single additional unit will be sold.[1][2] The marginal revenue is positive, but it is lower than the price associated with it because lowering the price will:

(a) increase the demand for its product, thereby increasing the firm's Sales Revenue,[1] and

(b) Lower the price paid by those who were willing to buy the product at the higher price, thereby ensuring a lower sales revenue on the product sales to those who were willing to pay the higher price.[1]

Marginal Revenue =  MR=P+P'(Q)*Q}MR=P+P'(Q)*Q[2]

where  0>P'(Q)}0>P'(Q)[2]

hope it may help u .....!

Answer 2

When elasticity of demand is equal to one in monopoly, marginal revenue will be Zero.

• Elastic demand is a situation where the change in quantity demanded due to a change in price is large.
• Marginal revenue is the increase in revenue that results from the sale of one extra unit of output.
• We know the relationship between MR and elasticity demand is, MR=AR(1− 1/e)
• So, when elasticity demand is one means e=1, then                            MR = AR(1− 1/1)                                                                                                     MR = AR(1-1)                                                                                              MR = AR(0)                                                                                                     ∴  MR = 0

∴ When elasticity of demand is equal to one, MR will be equal to zero.

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