Question

The diagram indicates that the marginal revenue of the sixth unit of output is.

How do I find the marginal revenue and show it on the graph for a monopoly?

Answer 1

A monopoly market is depicted by 2 downwared falling curves . First one is the Average Revenue curve (AR) which is the demand curve for monopoly and price is set at AR curve.

The marginal revenue curve (MR) is the downward falling curve below the Average Revenue curve (AR) . MR curve falls rapidly than AR. To calculate the MR curve , we must know the TOTAL REVENUE (TR).

TR = Average Revenue (Quantity)

TR = AR (Q)

Now MR = TR / Q

   MR = change in TR / change in Quantity.

Now you can first calculte TR with the above formula and then find MR from it .

MR for 6 th unit = TR(of 6 th unit) - TR (of 5th unit ) / Quantity at 6th unit - Quantity at 5th unit

Rest you can find the MR for all units and then plot those on graph .

Note -: 1. At 0 level of quantity , both MR and AR tend to be zero .

2. MR curve will always lie below AR .

3. The MR curve falls more rapidly than AR.