Question

How do changes in marginal revenue affect total revenue?

Answer 1

• When Marginal Revenue is Positive (MR > 0):
  1. Total Revenue increases as output increases.
  2. Example: Selling an extra unit adds more to total revenue.
• When Marginal Revenue is Zero (MR = 0):
  1. Total Revenue reaches its maximum.
  2. Any additional units sold do not change total revenue.
• When Marginal Revenue is Negative (MR < 0):
  1. Total Revenue decreases with additional output.
  2. Selling more units at a much lower price reduces overall earnings.