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Question
State the relation between marginal revenue and average revenue.
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.
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| Output (units) | Total Revenue (Rs) |
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| 1 | 6 | 7 |
| 2 | 12 | 13 |
| 3 | 18 | 17 |
| 4 | 24 | 23 |
| 5 | 30 | 31 |
Answer the following question.
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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.
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Under all market conditions, Average revenue and marginal revenue are equal to each other.
Assertion: A firm is able to sell more quantity of a commodity by reducing its price.
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