contestada

A marketing manager has just estimated that her firm's marginal revenue will become negative if a proposed price cut is made.
This means that:A. demand must be very elastic.
B. marginal cost must be negative already.
C. the firm is in pure competition.
D. more units may be sold—but total revenue will be less than it would be at the higher price.
E. None of the above—a firm's marginal revenue can't be negative.

Respuesta :

Answer:

D. More Units may be sold - but total revenue will be less than it would be at the higher price

Explanation:

Marginal Revenue (MR) represents the additional revenue that can be obtained if sales of a product are increased by one unit.

MR= is change in Total Revenue/Change in Total Output Quantity

In this situation as envisaged by the Marketing Manager, a price cut will lead to an increase in revenue based on more (marginal) units of the product sold at a lower price. The challenge, however, is that this increase in income will not be enough to offset the decrease in revenue that will result as a result of the price cut.

In other words, the organisation is better off selling fewer products or units at its current price than sell more (marginal units) at a reduced price.