When marginal revenue is negative, what is happening to total revenue?

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BlackTom AI · Accepted Answer

First, restating the core idea: the question asks about what happens to total revenue when marginal revenue is negative.
Option 1: 'It is zero.' This would imply total revenue has stopped changing at that moment, but if marginal revenue is negative, each additional unit sold reduces total revenue, so total revenue is not zero unless it happened to be exactly at a special point; in general, negative marginal revenue means a decline, not a flat total.
Option 2: 'It is diminishing.' Here, diminishing refers to total revenue decreasing as more units are sold due to negative marginal revenue. This aligns with the basic intuition: marginal revenue below zero reduces the cumulative total, causing diminishing total revenue.
Option 3: 'It is increasing.' This would contradict negative marginal revenue; if marginal revenue were negative, each extra unit would lower total revenue, not raise it, so increasing total revenue is incorrect.
Option 4: 'It is staying the same.' A constant total revenue would require marginal revenue to be zero; since the MR is negative, the total revenue is changing downward, so staying the same is inaccurate.

To summarize the logic: negative marginal revenue implies that adding units reduces revenue, so the total revenue is decreasing as output expands. Among the choices, the description that matches this behavior is that total revenue is diminishing, while the other options misstate the direction or the condition necessary for no change.

When marginal revenue is negative, what is happening to total revenue?

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