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Suppose Total Revenue is Rising at a Constant Rate as More Units of a Commodity Are Sold, Marginal Revenue Would Be - Economics

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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

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Solution

The correct option is (b). Average revenue (AR) means price which shows the demand which shows the relationship between price and quantity demanded of the firm’s output. Hence, at a constant rate, if total revenue (TR) is rising as more units of goods are sold, then the marginal revenue is equal to AR. In other words, if AR is constant, then MR = AR.

Concept: Total, Average and Marginal Revenue
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