Formula for Marginal Revenue Curve?
Is there a non-calculus formula for a marginal revenue curve? I'm taking Intro to Econ and I was sick the day we went over marginal revenue. I learned the material from the book, but it didn't mention a formula, and I need to know it for my homework. Thanks so much, I really appreciate all your help.
Why does the marginal revenue curve decrease?
Revenue is simply the amount of money a firm receives. If a firm is selling one product at a homogenous price (each unit sold is the same price) then total revenue will equal price times quantity.TR = P * QMarginal revenue is another important measure. Marginal revenue is the revenue obtained from the last unit sold. This is computed by taking the change in total revenue divided by the change in quantity.MR = Change in TR / Change in QFor competitive firms, marginal revenue isn't very interesting. If all units are sold for the market price, then marginal revenue will simply be the market price.Monopolies have a decreasing marginal revenue curve. The marginal revenue a monopoly gets from selling an additional unit will always be less than the price the unit is sold for. Since a monopoly's output affects the market price (unlike a competitive firm's output), the monopolist will get revenue equal to the price from selling an additional unit; however, in order to sell an additional unit, the monopolist must decrease the price for all units sold, and this is revenue that the monopolist loses. The sum of the revenue gained from selling the additional unit and the revenue lost from lowering the price on all units is the monopoly's marginal revenue.DONT FORGET TO UPVOTE IF YOU REALLY LIKED THE ANSWER!!
Why is the marginal revenue curve less than the demand curve for all imperfectly competitive firms?
The economic reason is that in these markets producers have to reduce price to sell more. Only in perfectly competitive market, producers can sell all at market price. The technical reason is that if the total revenue curve is quadratic, because of PxQ, the derivative will cause the slope of the MR curve to be 2 times flatter. For example Demand curve, P=2-3Q Total revenue=PQ=2Q-3Q*2 MR=dTR/dQ=2-6Q The slope of the MR curve will be 6>3 in the demand equation.
Why is the demand curve in monopoly downward sloping?
Simple. Let me explain the technical terms first.Monopoly is a market model where there exists only one seller. The elasticity of demand prevailing in that market is less elastic meaning even if the seller increases his price, people will knot stop consuming.So you'll think that demand doesn't fall with price rise so the demand curve should be upward rising. But all of us have heard this phraseBhaiya aapse itna sara liya hai paise kam lena (Brother I've bought so much from you, take less money)There's your answer. The monopolist will expect more profit and the consumer will not want to feel exploited. Thus the seller will have to reduce the price of the consequent units of commodities he sells in order to increase his sales.If that much answers your question then it's good. Hit me up for any diagram or tabular explanation.
In the kinked demand curve, what does the gap in marginal revenue represent?
Kinked demand curve theory - a theory that states that if a single firm in the industry cuts its price, all others will also, but if it increases price, other firms will not. In the kinked demand theory, firms face a kinked demand curve if, when one firm decreases its price, other firms will follow suit in order to maintain sales, and when one firm increases its price, its rivals are unlikely to follow, as they would lose the sales' gains that they would otherwise get by holding prices at the previous level. Kinked demand can start a price war because any one firm would receive a reduced benefit from cutting the price, but no firm would receive an increased benefit from raising the price.
Why is marginal revenue curve half of the demand curve?
First, let’s think about what is the meaning of marginal revenue. it means that for any extra unit we sold, what is the additional revenue we have for this unit. So in other words, it means the derivative of the total revenue, right?Then We assume for the function of a demand curve is P= aQ + b where ‘a’ and ‘b’ is the constant. then we will have the total revenue as TR = PQ = aQ^2 + bQ. so the derivative of the total revenue which is the MR is just MR = 2aQ + bIf we compare the slope between MR and Demand curve function, we will find out that the MR would be half of the demand Curve
Does the marginal revenue curve touch the horizontal axis?
The Marginal Revenue, can take positives, negatives and can be Zero too (Horizontal Axis).If The Marginal Revenue is POSITIVE, means that the Total Revenue for an additional good produced, is INCREASING.If The Marginal Revenue is NEGATIVE, means that the Total Revenue for an additional good produced, is DECREASING.If The Marginal Revenue is ZERO, means that the Total Revenue for an additional good produced, is THE MAXIMUM POSSIBLE.
Why is a monopoly demand curve a downward slope, in simple words?
Under the perfect competition , the demand curve which an individual firm has to face is perfectly elastic i.e. it runs parallel to the base axis. The demand curve facing the whole industry under perfect competition is sloping downward. This is because the demand of the consumer for a product usually slopes downward. The downward sloping demand curve of the consumer faces the whole competitive industry. The competitive seller(individual sellers) being unable to affect the market price sells it output at prevailing market price. Hence the MR equals the price of the product. The AR us identical to it's MR.However, it is not in the case of monopoly . The monopolist is the sole suppliers of the product in the market. He has the full power decision about the pricing of his own product. He is a price maker, he can raise the price if he is prepared to scarifies some sale . To put it in another way , monopolist can lower the price by increasing his level of sale and output and he can raise the price by reducing his level of sale or output.