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What is the relationship in price and marginal revenue for price setters?
Wiki User
∙ 10y ago
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.
Wiki User
∙ 10y ago
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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.
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.
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.
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.
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.
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.
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.
When demand is perfectly elastic what happens to marginal revenue?
When Demand is perfectly elastic, Marginal Revenue is identical with price.
Can marginal revenue ever be negative?
no,marginal revenue cannot be ever negative.this condition is only applies when price effect is on the revenue is greater than output effect
What is the condition of equilibrium for monopolist?
Marginal Revenue = Marginal Cost; mark-up price to the demand curve.
What is a change to the total revenue resulting from the sale of one more unit of output in aa perfectly competitive from?
The change of total revenue per unit sold is known as marginal revenue. In a perfectly competitive firm, marginal revenue = marginal cost = price.
Are marginal revenue average revenue and price are all equal for a monopolist?
No, in a monopolistic market, marginal revenue is less than average revenue and price. This is because the monopolist must lower the price in order to sell more units, leading to a decline in revenue per unit.
What is the relationship between price and marginal revenue when a monopolist cuts the price to sell more?
Between them exist a simple line of difference, a monopolist can sale more with less money CHACHA!
