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Marginal Revenue - Demand Curves

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Marginal Revenue becomes negative for a firm faced with a downward-sloping demand curve when:

a) the demand price becomes negative
b) the demand elasticity drops from elastic to inelastic
c) total revenue is maximized
d) the loss on previous units is at is maximum
e) both b and c

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Marginal Revenue = Price (1 - 1/|elasticity|)
(Verbally, this says divide one by the absolute value of elasticity. ...

Solution Summary

The marginal revenues to become negative for a firm faced with a downward-sloping demand curves are found.

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Monopolist Question: Demand curve, marginal cost, revenue

A monopolist with a straight-line demand curve finds
that it can sell two units at $12 each or 12 units at $2
each. Its fixed cost is $20 and its marginal cost is constant
at $3 per unit.
a. Draw the MC(marginal cost), ATC (average-total-cost), MR (marginal revenue), and demand curves for this
b. At what output level would the monopolist produce?
c. At what output level would a perfectly competitive
firm produce?

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