GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In imperfect competition marginal revenue falls at ____ than the fall in average revenue.
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Same rate
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Half the rate
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Twice the rate
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None of the above
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Explanation:
Detailed explanation-1: -The average revenue is the demand curve, revenue is calculated by q*p, so (a+q)q = aq-q^2, the marginal revenue is the rate of change in the revenue so if we differentiate wrt q, we get a-2q, which illustrates by the gradient, it is twice as steep.
Detailed explanation-2: -The relationship between average revenue and marginal revenue is the same as between any other average and marginal values. When average revenue falls marginal revenue is less than the average revenue. When average revenue remains the same, marginal revenue is equal to average revenue.
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