Page 232 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Unit-11: Concepts of Revenue

are different to each other. The marginal revenue is less than average revenue (MR < AR). This is the Notes
reason that when average revenue is less then the marginal revenue also lessens and the marginal
revenue gets smaller than average revenue.
In Fig. 11.2, the total revenue, average revenue and marginal revenue are shown in monopoly or
monopolistic competition.
In Fig. 11.2 (B), average revenue Curve AR and Must remember
marginal revenue curve are drawn. Both curves are
separate and downwards. It means the monopolists The sloping of AR curve is always downwards in
need to decrease the product price to increase sell. monopoly and monopolistic competition, but this is
Figure 11.2 (B) indicates that the CR Curve is below more flexible in monopoly competition. The reason
than AR Curve. This means that the decrement of behind this is in monopoly, there is no nearest
marginal revenue is greater than average revenue. substitute, while there is many substitutes for a
product in monopolistic competition.

Self Assessment

Multiple choice questions:
5. Revenue should not understand as ............... .
(a) profit (b) loss (c) sell (d) buy
6. Revenue is .............................. from a product to its producer.

(a) profit (b) loss (c) total price income (d) capital
7. The difference in total revenue by a firm by selling more or less of one more unit, is called ............... .
(a) marginal revenue (b) revenue (c) total revenue (d) none of these
8. The decreasing of marginal revenue indicates that revenue is rising at a ............... .
(a) decreasing rate (b) increasing rate (c) marginal rate (d) none of these

11.5 Rectangular Hyperbola AR Curve Under Monopoly

In monopoly condition, the income curve shows in Fig. 11.3, can be rectangular hyperbola as shown
in Fig. 11.3. In pure monopoly condition, the producer can so powerful that he sells all his products

Fig. 11.3

Y

6
Revenue 4 P

N
2
AR
0 MR X
2 4 6
Output

LOVELY PROFESSIONAL UNIVERSITY 225