When the average revenue falls,marginal revenue also falls and is less than the average revenue.

Question

Quizplus · Accepted Answer

When the average revenue falls, it means that the price at which each unit is sold is decreasing. As a result, in order to sell one additional unit, the producer has to decrease the price of all units sold. Therefore, the marginal revenue that the producer receives for selling one additional unit is less than the previous unit. This is why when the average revenue falls, marginal revenue also falls and is less than the average revenue.

When the Average Revenue Falls,marginal Revenue Also Falls and Is