The correct answer is A. Less than unity.
Marginal revenue is the additional revenue that a firm earns from selling one more unit of its product. It is calculated by taking the change in total revenue and dividing it by the change in quantity sold.
The elasticity of demand is a measure of how responsive consumers are to changes in price. It is calculated by taking the percentage change in quantity demanded and dividing it by the percentage change in price.
If the elasticity of demand is less than unity, then consumers are relatively unresponsive to changes in price. This means that if a firm raises its price, it will not lose as many customers as it would if consumers were more responsive to price changes. As a result, the firm’s marginal revenue will be negative.
Here is a diagram that illustrates the relationship between marginal revenue and elasticity of demand:
[Diagram of a demand curve with marginal revenue curve below it]
The demand curve is downward-sloping, which indicates that consumers are willing to buy less of a product when the price is higher. The marginal revenue curve is below the demand curve, which indicates that marginal revenue is always less than the price. This is because when a firm sells one more unit of its product, it has to lower the price on all of the units that it sells. This results in a loss of revenue on the units that it would have sold at the higher price.
The marginal revenue curve will be negative when the elasticity of demand is less than unity. This is because when the elasticity of demand is less than unity, a firm’s revenue will decrease when it raises its price. As a result, the firm’s marginal revenue will be negative.
I hope this explanation is helpful. Please let me know if you have any other questions.