what is marginal revenue and how it is related to average revenue
Solution :-
Marginal revenue is the revenue obtained from every additional unit sold by the producer. It is the change in revenue due to sale of an additional unit.
Average revenue is the total revenue divided by the quantity of output. Generally, it is the price of any good.
Relationship between average revenue and marginal revenue:
(I) When AR is constant, MR = AR.
(II) When AR is diminishing, AR> MR.
(III) When AR is rising, AR< MR.
(IV) MR can be negative, but not AR.
Marginal revenue is the revenue obtained from every additional unit sold by the producer. It is the change in revenue due to sale of an additional unit.
Average revenue is the total revenue divided by the quantity of output. Generally, it is the price of any good.
Relationship between average revenue and marginal revenue:
(I) When AR is constant, MR = AR.
(II) When AR is diminishing, AR> MR.
(III) When AR is rising, AR< MR.
(IV) MR can be negative, but not AR.