. When e = 1 then MR is


A: positive

B: zero

C: one

D: negative

Best Answer

Explanation :

  • e is the elasticity coefficient, or in other words, the ratio of percentage changes in two variables.
  • MR is marginal revenue, which refers to the extra income that a company receives from selling one additional unit of its product.
  • e = 1 is a special case in which the marginal revenue equals the elasticity of demand.
  • When the two are equal, marginal revenue is at its maximum value. 
  • The equation for marginal revenue is MR = e / (e - 1). As you can see, if e = 1 then 
  • MR = 1. If e = 1.001 then MR = .001.
  • If the marginal cost exceeds marginal revenue MC>MR), then producing more units will decrease profit (profit = TR-TC).
  • If the marginal cost exceeds marginal revenue (MC>MR), then producing more units will decrease profit (profit = TR-TC).

Final answer :

Hence the correct option is C .One.

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