Page 2 - Lession note - Revenue-45

AR curve is extended till point B, then MR curve cuts the X-axis exactly halfway
between the point of origin (O) and point B, so that OA = AB.
Case IV: Relationship between Total Revenue and Marginal Revenue when
Price Falls
1. When MR falls and remains positive, than total revenue increase at a
diminishing rate.
(a) As per Schedule, till the 5th unit of output, MR falls but remains positive and,
thus, TR increases at diminishing rate.
(b) In Figure, the TR curve increases at a diminishing rate (till point P) as long as
MR is positive (till point P1).

2. When MR is zero, then TR is maximum and constant.
(i) As per Schedule, at the 6th unit, MR is zero and TR is at its maximum and
constant.
(ii) In Figure, when MR is zero (point P1), Total Revenue reaches its highest point
(point P).
3. When MR is negative, then TR falls.
(i) As per Schedule, after 6th unit, MR not only falls, but also becomes negative