ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the quantity effect outweighs the price effect
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the price effect outweighs the quantity effect
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total revenue is rising at an increasing rate
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total revenue is declining at a decreasing rate
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Detailed explanation-1: -The quantity effect dominates the price effect when total revenue is positive. So, correct answer is A. The quantity effect dominates the price effect when total revenue is positive.
Detailed explanation-2: -MR is positive when the change in output is more than the change in price. MR is negative when the change in price is more than the change in output.
Detailed explanation-3: -If elastic: The quantity effect outweighs the price effect, meaning if we decrease prices, the revenue gained from the more units sold will outweigh the revenue lost from the decrease in price.
Detailed explanation-4: -1. If marginal revenue is greater than marginal cost, the monopolist should increase output. 2. If marginal revenue is less than marginal cost, the monopolist should decrease output.
Detailed explanation-5: -When a monopolist increases output by one unit, it must reduce the market price in order to sell that unit. If the price elasticity of demand is less than 1, this will actually reduce revenue-that is, marginal revenue will be negative.