Derivation of TR, AR, and MR under Monopoly or imperfect competition:
Monopoly is the market structure having a single seller selling the type of product which has no close substitute. They are the price makers. Under Monopoly, a monopolist can increase its revenue by selling few products at a high price and more products at a low price. The TR, AR, and MR can be derived by the help of the following the schedule:
In the above table, we can see that when the quantity sold is increasing, the price is decreasing. Total revenue increases at first up to the fifth unit then becomes maximum and declines thereafter. AR and price are similar. Marginal revenue is declining, becomes zero and even negative.
The TR, AR and MR Curve can be derived from the above schedule as follows:
In the above diagram TR, MR and AR are shown along y-axis and quantity sold is shown along x-axis respectively. We can observe that when total revenue is rising AR and MR are falling. When TR becomes maximum, marginal revenue becomes zero. When TR starts to fall, then marginal revenue declines to negative.