(a) Relationship between TR and MR. MR represents addition to TR.

(i) When MR is positive, TR rises.

(ii) When MR = 0, TR is maximum.

(iii) When MR is negative, TR falls.

(iv) In case when MR becomes constant TR increases at a constant Rate

Qty sold (Q)	Price (P)	TR		MR
1 2 3	6 5 4	6 10 12	TR rises	6 4 2	MR > 0
4	3	12	TR max	0	MR = 0
5 6	2 1	10 6	TR falls	-2 -1	MR < 0

(b) Relationship between MR and AR

(i) When a firm is able to sell more quantity of output at the same price ti,e., under perfect competition) then AR and MR are equal and AR and MR curves take the shape of a straight line parallel to x-axis.

Q	P	TR	MR	AR/P
1	10	10	10	10
2	10	20	10	10
3	10	30	10	10
4	10	40	10	10

(ii) When a firm is able to sell more quantity of output only by lowering the price, then AR and MR both will be falling, i.e., sloping downward and MR will be less than AR. The rate of decline in MR is twice the rate of decline in AR.

Q	P	TR	MR	AR/P
1	4	4	4	4
2	3	6	2	3
3	2	6	0	2
4	1	4	-2	1