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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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Solution Summary

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

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

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