Why can price be substituted for marginal revenue?
Explain why price can be substituted for marginal revenue in the MR=MC rule when an industry is purely competitive. Because the price is constant regardless of the quantity demanded and marginal revenue is equal to price. Therefore, price can be substituted for the marginal revenue in the MR=MC rule.Click to see full answer. Beside this,…
Explain why price can be substituted for marginal revenue in the MR=MC rule when an industry is purely competitive. Because the price is constant regardless of the quantity demanded and marginal revenue is equal to price. Therefore, price can be substituted for the marginal revenue in the MR=MC rule.Click to see full answer. Beside this, why does marginal revenue equal price?Specifically, price only equals marginal revenue in perfect competition. Price equals MR in perfect competition because your demand curve is horizontal. No matter how much you produce, it always sells at the same price. In other market structures, you can raise or lower prices.Also Know, why is a monopolist’s marginal revenue less than the price of its good? A monopolist’s marginal revenue is less than the price of its good because it must reduce their price in order to sell more of their products and because the demand curve is a downward slope. Marginal revenue can be negative depending on costs. 4. Keeping this in view, why is the equality of marginal revenue and marginal cost? Maximizing Profits Economists tell us that a business can maximize its profit by producing at the level where marginal revenue equals marginal cost. As long as marginal revenue is greater than marginal cost, it pays to produce more. Each added unit sold will add more to revenue than to costs.Why is Mr twice as steep as demand?When we look at the marginal revenue curve versus the demand curve graphically, we notice that both curves have the same intercept on the P axis, because they have the same constant, and the marginal revenue curve is twice as steep as the demand curve, because the coefficient on Q is twice as large in the marginal
