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The theory of the firm under perfect competition — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsThe theory of the firm under perfect competition4 Marks
Question
What change in total revenue will result in:
  1. A Decrease in marginal revenue.
  2. An increase in marginal revenue?
✓

Answer

  1. A decrease in marginal revenue leads to total revenue increase at a diminishing rate. It can be explained with the help of following schedule:
Units Sold MR (₹) $\text{TR}=\sum\text{MR}$
1 10 10(10 + 0)
2 8 18(10 + 8)
3 6 24(18 + 6)
4 4 28(24 + 4)
5 2 30(28 + 2)
  1. An increase in marginal revenue leads to total revenue increase at an increasing rate. It can be explained with the help of following schedule:
Units Sold MR (₹) $\text{TR}=\sum\text{MR}$
1 10 10(10 + 0)
2 12 22(10 + 12)
3 14 36(22 + 14)
4 16 52(36 + 16)
5 19 71(52 + 19)

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