State the Relation Between Marginal Revenue and Average Revenue. - Economics

Advertisements
Advertisements

State the relation between marginal revenue and average revenue.

Advertisements

Solution

Marginal Revenue (MR) and Average Revenue (AR):

The relationship between MR and AR can be explained through two forms of market, i.e. perfect competition market and imperfect competition market.

i. Under the perfect competition market, AR is equal to MR at all levels of output.Hence, the MR curve is a straight horizontal line which is parallel to the X-axis and coincides with the AR curve

ii. Under the imperfect competition market, as the output or sales increases, both AR and MR curves decline. However, AR remains greater than MR at all levels of output. Also, when AR becomes zero, the MR will be negative.

  Is there an error in this question or solution?
2013-2014 (March) Delhi Set 1

Video TutorialsVIEW ALL [1]

RELATED QUESTIONS

Suppose total revenue is rising at a constant rate as more units of a commodity are sold, marginal revenue would be:

(a) Greater than average revenue

(b) Equal to average revenue

(c) Less than average revenue

(d) Rising


What is meant by revenue in microeconomics?


Under which market form a firm's marginal revenue is always equal to price?


What is the behaviour of average revenue in a market in which a firm can sell more only by lowering the price?


A firm is able to sell any quantity of a good at a given price. The firm's marginal revenue will be : (Choose the correct alternative):

(a) Greater than Average Revenue

(b) Less than Average Revenue

(c) Equal to Average Revenue

(d) Zero


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


Define Average Revenue. Show that Average Revenue and Price are same.


Define marginal revenue.


From the following information about a firm, find the firm's equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also, find profit at this output

Output (units) Total Revenue
(Rs)
Total Cost (Rs)
1 6 7
2 12 13
3 18 17
4 24 23
5 30 31

Answer the following question.
Name the market where average revenue is equal to marginal revenue. Give a reason for your answer.


Choose the correct answer from given options
The Total Revenue earned by selling 20 units is ₹ 700. Marginal  Revenue earned by selling the 21st unit is ₹ 70. The value of Total Revenue earned by selling total 21 units will be ______________.


Fill in the blank.
Under imperfect competition, Average Revenue (AR) remains ___________ Marginal Revenue (MR).


Explain whether the statement is true or false with reasons.

Under all market conditions, Average revenue and marginal revenue are equal to each other.


Share
Notifications



      Forgot password?
Use app×