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Question
What happens to total revenue when the marginal revenue is zero?
Short Answer
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Solution
When marginal revenue (MR) is zero, it means that total revenue (TR) is at its maximum. At this point, selling one more unit does not add anything to total revenue.
In other words, the firm is earning the highest possible total revenue, and any further increase in output would start to decrease total revenue (because MR would become negative).
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Chapter 8: Cost and Revenue Analysis - TEST YOURSELF QUESTIONS [Page 161]
