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Answered 2009-12-29 15:52:53
The calculus-free answerThink of the effect incremental increases in quantity have on total revenue. Make a simple graph with a demand curve and draw boxes representing total revenue. Notice how the total area of the box (representing the total revenue) varies as quantity increases. With a linear demand curve, as you move down the curve the box becomes larger and larger in area until you reach the curve's midpoint. This means that the MR up to this point was positive because TR was increasing. After this point the area of the box declines, this means that from this point forward the MR is negative because TR is decreasing. This is why the MR curve hits zero at half the quantity the demand curve hits zero. Hope this helps.


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Why do the demand and marginal revenue curves coincide?

Because in Pure Competition, Demand equals Price, and Price equals Marginal Revenue;hence, Demand equals Marginal revenue.

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When Demand is perfectly elastic, Marginal Revenue is identical with price.

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marginal revenue always lies behind the demand curve,and when demand increases marginal revenue also increases.demand curve is used to determine price of a commodity.

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Price elasticity of demand is a way to determine marginal revenue. Optimal revenue and, more importantly, optimal profit will occur to the point when marginal revenue = marginal cost, or the price elasticity of demand < 1.

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This question reflects a fundamental misunderstanding of supply and demand. Marginal revenue and average revenue are related to a firm's cost function, and are thus connected to SUPPLY. They have nothing to do with a demand curve in classical economics, which is the marginal benefit to the CONSUMER of being in the market.

What is the condition of equilibrium for monopolist?

Marginal Revenue = Marginal Cost; mark-up price to the demand curve.

How do you achieve the profit-maximizing price?

Profit-maximizing price is found at the quantity where MR=MC, marginal revenue=marginal cost. You will have to graph both marginal revenue and marginal cost and find the point of intersection. That is the profit-max quantity, but then you will have to find its corresponding price. In perfect competition, price=marginal revenue, which is constant, but in an imperfect economy, you will have to find the demand at the profit-max quantity and find the corresponding price from the demand curve.

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Why does marginal revenue curve lie below the Demand curve?

Since Marginal revenue refers to the additional revenue earned by a monopolist by increasing the sale by 1 unit ( usually through lowering the price ), the additional revenue earned will always be less since there has been a drop in price.

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Profit maximization occurs when the firm produces /sets their price at the intersection of the marginal cost curve and the horizontal MR DARP curve (marginal revenue, demand, average revenue, price)

What is profit maximization in perfect competion?

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In a monopoly why is the marginal revenue curve always below the demand curve?

because price and output are related by the demand function in a monopoly. it is the same thing to choose optimal price or to choose the optimal output. even though the monopolist is assumed to set price and consumers choose quantity as a function of price, we can think of the monopolist as choosing the optimal quantity it wants consumers to buy and then setting the corresponding price. OR in simpler terms Because AR (demand) is downward sloping - (see equi-marginal rule or Law of Equi-Marginal Utility). To sell one more unit of output, the firm must lower its price, meaning that the revenue received is less than that received for the previous unit (marginal revenue received for unit 2 is less than that for unit 1). Therefor the marginal revenue will be less than the average revenue. Unit 1 sold for $5 Marginal revenue=$5 Average Revenue=$5 Unit 2 sold for $4 Marginal revenue=$4 Average Revenue=$4.50 ($5+$4/2)

When a firm makes a profit by producing enough goods to meet demand without having leftover supply at what point is this?

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Why does a Perfect Competition firms demand curve is also its marginal revenue curve?

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The demand curve for a monopolist differs from the demand curve faced by a competitive firm?

The pure monopolist's market situation differs from that of a competitive firm in that the monopolist's demand curve is downsloping, causing the marginal-revenue curve to lie below the demand curve. Like the competitive seller, the pure monopolist will maximize profit by equating marginal revenue and marginal cost. Barriers to entry may permit a monopolist to acquire economic profit even in the long run.

Why the marginal revenues curve is always half of the demand curveexplain graphically and algebrically?

Firms in most cases opt to select prices in the elastic regions of their demand curve. This fact explains why marginal revenue curve is always below.

What demand curve indicates the firm incurs a loss?

It's when the MR is not equal to MC. The firm in this case is unable to produce output the equals marginal revenue to marginal cost.

How can the demand curve be derived using the marginal utility theory?

Marginal utility is the key concept underline demand .The height of a demand curve reflects marginal utility.The marginal utility curve resembles the demand curve. So, it is through the marginal utility we get the demand curve.

Why MR curve is always half of demand curve explain graphically?

Marginal Revenue is the derivate (rate of change) of total revenue. Total revenue is = Price x Quantity. For instance, if the demand curve was Q = 100 - P, find the inverse demand (P = 100 - Q). Total Revenue = 100Q-Q^2Therefore marginal revenue is the derivative of 100Q - Q^2.MR = 100 - 2Q (thus twice the negative slope).In short: inverse demand x Q, find the derivative.Source(s):Microeconomic Theory Class

When a firm's marginal revenue is zero what can be said about the elasticity of demand for the output of the firm A. Demand is inelastic. B. Demand is elastic. C. Demand is unit elastic.?

Demand is unit elastic.

Why is the demand curve the same as the marginal revenue curve for a perfectly competitive firm?

Because for a perfectly competetive firm since the demand curve is perfectly elastic even a slightest price change doesnt add any further there is no change in marinal revenue also.Since revenue is demand multiplied with cost of unit..the two curves are same.

Why is the marginal revenue curve the same as its demand curve?

The marginal revenue curve describes the incremental change in revenue (that is, price*units sold). The MR is not always equivalent to its demand curve. The more perfect competition is, the closer demand approaches the MR. This is because, in perfect competition, firms sell at the MC = MR = P criterion. In the opposite case, monopoly, MR always lies under of demand, and firms achieve monopoly profits by choosing a production quantity where MC = MR and charging a price mark-up.

Importance of calculus in business?

Some of the business applications are: (1) Finding the number of ouputs produced to maximize the profit. (2) Calculation of marginal revenue , marginal cost (3) Calculation of marginal average cost (4) Calculating elasticity of demand