M.R less than selling price per unit?

Wwahab1113y ago

well I have heard the relevant lecture and I still do not understand:
Why is marginal revenue less than selling price per unit, especially at point of optimum selling price in downward demand curve?

John MoffatTutor13y ago#1

Marginal revenue is the extra revenue from selling one extra unit. If the selling price is being reduced in order to be able to sell extra units (it has to be reduced for all units) then the extra revenue is certainly likely to be less than the selling price of that one unit!

Imagine you were selling 100 units at $10 each, That means the revenue is 1000.
Suppose that in order to sell 101 units you had to reduce the price to $9.95 a unit.
That would mean the total revenue would be 101 x $9.95 = 1004.95

The extra (or marginal) revenue would be $4.95.

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