Question

Elasticity of demand is equal to unity while marginal revenue is _______.

• A. positive
• B. zero
• C. negative
• D. indeterminate

Answer 1

The correct option is B zero

1.Marginal revenue is related to the price elasticity of demand — the responsiveness of quantity demanded to a change in price. When marginal revenue is positive, demand is elastic; and when marginal revenue is negative, demand is inelastic. The output level at which marginal revenue equals zero corresponds to unitary elasticity.
2.TR = R = total revenue. On a graph with both a demand curve and a marginal revenue curve, demand will be elastic at all quantities where marginal revenue is positive. Demand is unit elastic at the quantity where marginal revenue is zero.