relation between TR,AR,MR
The relationship among TR, AR and MR can be summarised as follows:
(i) Initially, TR (i.e., price x units of the commodity sold) increases at a diminishing rate with increase in the units of output, since more units of the commodity can only be sold at a lower price, such that MR is positive and is downward sloping.
(ii) When TR is maximum MR becomes equal to zero.
(iii) MR becomes negative, when TR decreases with increase in the units of output.
(iv) MR falls with the fall in AR, but, the rate of decrease in MR is much higher than that in AR.
(v) MR may be positive, negative or zero, but AR is always positive (since negative price is absurd)
The above relationship holds true in case of all forms of imperfect competition that is, monopoly, duopoly, oligopoly, monopolistic competition, etc. Under imperfect competition, as a firm lowers the price, the quantity demanded goes up and average revenue curve slopes downward as a result.