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A Firm is Able to Sell More Quantity of a Good Only by Lowering the Price. the Firm’S Marginal Revenue, as He Goes on Selling, Would Be :(Choose the Correct Alternative) - Economics

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A firm is able to sell more quantity of a good only by lowering the price. The firm’s marginal revenue, as he goes on selling, would be :(Choose the correct alternative)

a. Greater than average revenue

b. Less than average revenue

c. Equal to average revenue

d. Zero

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Solution

The correct option is (b). A firm can sell more quantity of a good only by lowering the price of the good. There is a negative relationship between the price of the good and the demand for the good in a monopoly market. If the average revenue falls, then the marginal revenue also falls but faster than AR and therefore MR < AR.

Concept: Total, Average and Marginal Revenue
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