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What change in total revenue will result in(a) A decrease in marginal revenue, and(b) An increase in marginal revenue. |
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Answer» (a) A decrease in marginal revenue – When MR is declining, less is added to TR for every additional unit sold. Accordingly, TR increases only at a diminishing rate. TR stops increasing when MR = 0 so that TR is maximum when MR = 0. (b) An increase in marginal revenue – In case AR is constant (as under perfect competition), MR is also constant, implying that TR increases at a constant rate. Accordingly, TR forms a straight line sloping upward and starting from the origin. |
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