Question

Which of the following statement is true?

a. average revenue and marginal revenue have positive slope.
b. mr curve lies above ar curve. (ar > mr).
c. marginal revenue falls twice the rate of average revenue.
d. so long as marginal revenue decreases and negative, total revenue increasing at diminishing rate.

Answer 1

The correct statement is option B: the marginal revenue curve (MR) lies above the average revenue curve (AR).

Step-by-step explanation:

Marginal revenue is affected in two ways when the quantity sold by one unit increases. First, we sell one additional unit at the new market price. Second, all the previous units, which were sold at a higher price, now sell for less. As a result, the marginal revenue of selling a unit is less than the price of that unit. Therefore, the correct statement is option B: the marginal revenue curve (MR) lies above the average revenue curve (AR).