ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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equal to average revenue
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less than average revenue
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increasing
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decreasing
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greater than zero
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Detailed explanation-1: -With an increase in output, if the total revenue decreases, it is always because the marginal revenue is negative. A relationship exists between total revenue and total cost such that when the marginal revenue goes negative, the total revenue begins to decline.
Detailed explanation-2: -Does Marginal Revenue Increase If Total Revenue Increases? There is a positive correlation between marginal and total revenue. This means that when total revenue increases, marginal revenue is positive.
Detailed explanation-3: -If selling another unit increases total revenue, the marginal revenue must be greater than zero. If marginal revenue is less than zero, then selling another unit takes away from total revenue. If marginal revenue is zero, than selling another does not change total revenue.
Detailed explanation-4: -If marginal revenue is zero, total revenue remains unchanged.
Detailed explanation-5: -Beyond the peak, the marginal revenue is negative. Firms with some market power should not sell beyond the point where the marginal revenue is equal to zero. If the firm sells an additional unit beyond this point, the total revenue will decrease since the marginal revenue will be negative.