[amp_mcq option1=”MR > 0″ option2=”MR < 0\" option3=\"MR = 0\" option4=\"MR = 1\" correct=\"option3\"]<\/p>\n
The correct answer is: C. MR = 0.<\/p>\n
Marginal revenue (MR) is the additional revenue that a firm earns from selling one more unit of its product. It is calculated by taking the derivative of total revenue (TR) with respect to quantity (Q).<\/p>\n
Price elasticity of demand (e) is a measure of how responsive consumers are to changes in price. It is calculated by taking the percentage change in quantity demanded divided by the percentage change in price.<\/p>\n
When e = 1, demand is unit elastic. This means that a 1% increase in price will lead to a 1% decrease in quantity demanded. In this case, marginal revenue will be equal to zero.<\/p>\n
Here is a diagram that illustrates the relationship between price, marginal revenue, and elasticity of demand:<\/p>\n
[Diagram of a demand curve with a price elasticity of demand of 1]<\/p>\n
As you can see, when the price elasticity of demand is equal to 1, the demand curve is a straight line. This means that the percentage change in quantity demanded is equal to the percentage change in price. In this case, marginal revenue will be equal to zero.<\/p>\n
Here is a brief explanation of each option:<\/p>\n
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