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How can a company have a downward demand curve but still have marginal revenue equal price?
Wiki User
∙ 15y ago
If the Demand Curve is separate from the MR=P curve, the company can not be of Perfect Competition. It can exist in any other market structure: Monopolistic Competition, Monopoly, or Imperfect Competition. In each of these three structures, the Demand Curve will always fall twice as fast as the MP=P=AR Curve. To answer your question in these terms, the company can have a downward sloping Demand Curve separate from the MR=P curve if it is not in the PC Market Structure.
Wiki User
∙ 15y ago
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If marginal revenue is less than average revenue will the demand curve be downward sloping?
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.
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.
When demand is perfectly elastic what happens to marginal revenue?
When Demand is perfectly elastic, Marginal Revenue is identical with price.
Relationship between Marginal revenue and Demand curve?
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.
How to use the concept of price elasticity of demand to maximize revenue?
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.
If marginal revenue is less than average revenue will the demand curve be downward sloping?
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.
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.
When demand is perfectly elastic what happens to marginal revenue?
When Demand is perfectly elastic, Marginal Revenue is identical with price.
Relationship between Marginal revenue and Demand curve?
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.
How to use the concept of price elasticity of demand to maximize revenue?
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.
What is the relationship between price elasticity of demand and the monopolist's revenue?
marginal revenue is negative where demand is inelastic
If marginal revenue product capital increases the demand or supply curve?
Demand.
What is the condition of equilibrium for monopolist?
Marginal Revenue = Marginal Cost; mark-up price to the demand curve.
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 it?
When a firm makes a profit by producing enough goods to meet demand without having leftover supply the point of profit is where marginal revenue equals marginal cost.
How does the principle of diminishing marginal utility explain the slope of the demand curve?
The principle of diminishing marginal utility explains the slope of the demand curve by letting us be able to see which direction the slope is in, which is always downward.
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.
