When marginal revenue is zero, demand will be
A)elastic.
B)inelastic.
C)unit elastic.
D)there is not sufficient information to classify the elasticity of demand.

Question

Quizplus · Accepted Answer

When marginal revenue is zero, it means that the revenue gained from selling one additional unit of a good or service is equal to the cost of producing that unit. This indicates that the firm has achieved the maximum profit by producing and selling the current quantity of output. At this point, the demand will be unit elastic, meaning that a change in price will result in an equal percentage change in the quantity demanded. This is because consumers are indifferent between buying the product at the current price and not buying it at all.

When Marginal Revenue Is Zero, Demand Will Be