If the price elasticity of demand for a firm's output is unit elastic, then marginal revenue is equal to zero and total revenue is at a maximum.

Question

Quizplus · Accepted Answer

When demand is unit elastic, a percentage change in price leads to an equal percentage change in quantity demanded, resulting in no change in total revenue. Since marginal revenue is the change in total revenue from selling one more unit, and total revenue is maximized and does not change at the point of unit elasticity, marginal revenue is zero.

If the Price Elasticity of Demand for a Firm's Output