Suppose total revenue is rising at a constant rate as more and more units of a commodity are sold, marginal revenue would be: (choose the correct alternative)

Greater than average revenue

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Equal to average revenue

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Less than average revenue

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Rising

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Solution

The correct option is B Equal to average revenue
The correct option is (b).
Average revenue (AR) means price which shows the relationship between price and quantity demanded of the firm’s output. Hence, at a constant rate, if total revenue (TR) is rising as more units of goods are sold, then the marginal revenue is equal to AR. In other words, if AR is constant, then MR = AR.

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Similar questions

Explain the relation between marginal revenue and average revenue when a firm is able to sell more quantity of output :

(i) at the same price.

(ii) only by lowering the price.

Explain the effect of the following on the supply of a commodity :

(a) Fall in the prices of factor inputs.

(b) Rise in the prices of other commodities.

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