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define marginal revenue. what happens to average revenue when marginal revenue is
(i)less than average revenue
(ii)equal to average revenue
[6 marks]

Well done Shivanshi!!

Marginal revenue is the additional revenue generated from the sale of an additional unit of output. It is the change in Total revenue from sale of one unit of a commodity or a good.

When MR or marginal revenue is less than average revenue (AR) then it means that revenue from every additional unit of output will be less than AR. Therefore AR and MR curve falls with Mr below AR.

When MR is equal to AR then it means that revenue generated from every additional unit of output is equal to AR or price. Therefor MR and AR curves will coincide to each other and will be a straight line parallel to x axis.

Regards

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DEFINITION: Marginal revenue is the change in total revenue by the sale of one more unit or one additional unit of output.

i) Under imperfect competition, MR is less than AR. Here AR falls as MR falls, but while MR can be 0 or negative, AR cannot. AR decreases when MR is less that AR.
ii) Under perfect competition, where MR=AR, AR is a straight line parallel to x-axis, coinciding with the MR curve. Under imperfect competition, MR=AR at only the first level of output, where both curves touch each other, after which both start falling.
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