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Question
Find the marginal revenue if the average revenue is 45 and elasticity of demand is 5.
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Solution
Given, average revenue (RA) = 45 and
elasticity of demand (η) = 5
Rm = RA `(1 - 1/η)`
∴ Rm = `45 (1 - 1/5) = 45(4/5)`
∴ Rm = 36
∴ Marginal revenue (Rm) = 36
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