Asked by Zachary Robert on May 10, 2024
Verified
Using the graph of a demand curve, explain why marginal revenue is less than price.
Marginal Revenue
Marginal revenue is the additional revenue that a firm gains from selling one more unit of a good or service.
Demand Curve
A graph showing the relationship between the price of a good and the quantity demanded by consumers at those prices.
Price
The cost in money to purchase a particular good or service.
- Acquire knowledge on the notion of marginal revenue and its association with price.
Verified Answer
SJ
Suzette JonesMay 12, 2024
Final Answer :
Since marginal revenue is the additional revenue received from selling an additional unit of output, it can be graphically represented as box A, increased revenue from an additional unit sold, minus box B, revenue lost from price cuts on units of output that would have been sold at the former price.Since box A has an area equal to the price P, then MR P.
Learning Objectives
- Acquire knowledge on the notion of marginal revenue and its association with price.