CBSE BoardEnglish MediumSTD 11 CommerceEconomicsMICROECONOMICS CH : 9 CONCEPT OF REVENUE2 Marks
Question
Under which condition marginal revenue can be negative? Explain with the help of an example.
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Answer
MR can be negative, though only when average revenue is decreasing or when price is declining. In case of perfect competition, it is not possible where price remains constant for a firm. When price =₹ 4, and output =10 $ \begin{aligned} TR_{10} & =P \times Q \\ & =4 \times 10=40 \end{aligned} $ When price falls to ₹ 3, and output =11 $ \begin{aligned} TR_{11} & =P \times Q \\ & =3 \times 11=33 \\ Accordingly, MR & =TR_{11}-TR_{10} \\ & =33-40 \\ & =-7 \end{aligned} $ Implying that MR is negative.
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