When the marginal revenue curve intersects the horizontal axis <\/p>\n\n\n\n
A. demand is unitary elastic. <\/p>\n\n\n\n
B. demand is perfectly elastic.<\/p>\n\n\n\n
C. demand is relatively elastic. <\/p>\n\n\n\n
D. demand is relatively inelastic.<\/p>\n\n\n\n
The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n Correct Answer: A. demand is unitary elastic.<\/strong><\/p>\n\n\n\n When the marginal revenue (MR) curve intersects the horizontal axis<\/strong>, it indicates that marginal revenue is zero<\/strong>. This specific point corresponds to the point on the demand curve<\/strong> where total revenue is maximized<\/strong>. At this point, any increase or decrease in price results in no change in total revenue, which by definition means that price elasticity of demand is equal to one<\/strong>, or unitary elastic<\/strong>.<\/p>\n\n\n\n Price elasticity of demand (Ed)<\/strong> measures how much quantity demanded responds to a change in price. It is calculated as: Ed=% change in quantity demanded% change in priceEd = \\frac{\\%\\ \\text{change in quantity demanded}}{\\%\\ \\text{change in price}}<\/p>\n\n\n\n When Ed > 1<\/strong>, demand is elastic<\/strong>, meaning consumers are responsive to price changes. When Ed < 1<\/strong>, demand is inelastic<\/strong>, and consumers are less responsive. But when Ed = 1<\/strong>, the demand is unitary elastic<\/strong>, meaning a 1% change in price results in a 1% change in quantity demanded, leaving total revenue unchanged<\/strong>.<\/p>\n\n\n\n The marginal revenue curve<\/strong> lies below the demand curve<\/strong> in monopolistic or imperfectly competitive markets because to sell more units, the firm must lower the price not only for the additional unit but for all previous units as well. As output increases, marginal revenue falls and eventually reaches zero. At this point, total revenue stops increasing and begins to fall if output increases further.<\/p>\n\n\n\n Therefore, the point where MR = 0<\/strong> corresponds exactly to where total revenue is at its maximum<\/strong> and price elasticity of demand is unitary<\/strong>. This economic relationship explains why A. demand is unitary elastic<\/strong> is the correct answer.<\/p>\n","protected":false},"excerpt":{"rendered":" When the marginal revenue curve intersects the horizontal axis A. demand is unitary elastic. B. demand is perfectly elastic. C. demand is relatively elastic. D. demand is relatively inelastic. The correct answer and explanation is: Correct Answer: A. demand is unitary elastic. When the marginal revenue (MR) curve intersects the horizontal axis, it indicates that […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-39892","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/39892","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=39892"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/39892\/revisions"}],"predecessor-version":[{"id":39893,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/39892\/revisions\/39893"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=39892"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=39892"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=39892"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}