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The marginal revenue of selling an additional unit of output for a price setter (hence within an imperfect market) is always less than market price.
Picture a downwards sloping market demand curve (hence individual monopolies demand curve); at P=6, Q=2, and at P=5, Q=3. To sell an additional unit of output, the firm must drop price from 6 to 5, meaning the total revenue will increase from (6x2)=12 to (5x3)=15. This increase in revenue (marginal revenue) is $3. Note $3 is not only smaller than the original price, but than the new price as well.
Hence, price is always greater than marginal revenue for a price setter.
What else can I help you with?
What is the relationship between price and marginal revenue in a competitive market?
In a competitive market, the relationship between price and marginal revenue is that they are equal. This means that the price of a good or service is equal to the marginal revenue generated from selling one more unit of that good or service.
How does a monopolistically competitive firm determine its profit-maximizing price?
price = marginal revenue. marginal revenue > average revenue. price > marginal cost. total revenue > marginal co
What is the relationship between price elasticity of demand and the monopolist's revenue?
marginal revenue is negative where demand is inelastic
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.
Does the price equal the marginal revenue in a competitive market?
In a competitive market, the price does equal the marginal revenue.
What is the relationship between price and marginal revenue in a competitive market?
In a competitive market, the relationship between price and marginal revenue is that they are equal. This means that the price of a good or service is equal to the marginal revenue generated from selling one more unit of that good or service.
How does a monopolistically competitive firm determine its profit-maximizing price?
price = marginal revenue. marginal revenue > average revenue. price > marginal cost. total revenue > marginal co
What is the relationship between price elasticity of demand and the monopolist's revenue?
marginal revenue is negative where demand is inelastic
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.
Does the price equal the marginal revenue in a competitive market?
In a competitive market, the price does equal the marginal revenue.
Is marginal revenue equal to price in economics?
In economics, marginal revenue is not always equal to price. Marginal revenue is the additional revenue gained from selling one more unit of a product, while price is the amount customers pay for that product. In competitive markets, where firms are price takers, marginal revenue is equal to price. However, in markets with market power, such as monopolies, marginal revenue is less than price.
What is inverse marginal revenue function?
The inverse marginal revenue function expresses the price or quantity at which a firm can achieve a specific level of marginal revenue. It is derived from the marginal revenue function, which indicates how revenue changes with changes in quantity sold. Inverse marginal revenue helps firms determine the optimal pricing strategy by relating the marginal revenue back to the quantity sold or price charged, allowing for better decision-making in maximizing profits. Essentially, it provides insights into the relationship between pricing and output levels in a market.
How does the relationship between price and marginal revenue impact the decision-making process of a competitive firm?
The relationship between price and marginal revenue affects a competitive firm's decision-making by influencing how much to produce and sell. When the price is higher than the marginal revenue, the firm will produce more to maximize profits. If the price is lower than the marginal revenue, the firm may reduce production to avoid losses. This helps the firm determine the optimal level of output to maximize profits in a competitive 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.
Is marginal revenue equal to price in a perfectly competitive market?
In a perfectly competitive market, marginal revenue is equal to price.
Is the price equal to marginal revenue in a perfectly competitive market?
In a perfectly competitive market, the price is equal to the marginal revenue.
What is the formula to find the marginal cost?
Marginal Cost = Marginal Revenue, or the derivative of the Total Revenue, which is price x quantity.
