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A bandwidth of +/-5kHz seems just about right for medium wave AM, …
The r-f bandwidth shown in the chart means that 5 kHz audio in a perfect AM receiver would be about 19 dB below the value at 100 Hz. That would take an extreme amount of pre-emphasis to overcome, and would reduce low frequency modulation of the transmitter by about 19 dB in order to avoid overmodulating at 5 kHz.
An added benefit of so narrow a bandwidth will serve to reject unwanted reception of RF energy from radio transmitters nearby on the dial.
Unfortunately, not so. This r-f response is a characteristic of the transmit system, not the receiver. The receiver response could still accept other signals lying within the r-f bandwidth of the receiver.
Also, is it not true that a narrower bandwidth has the advantage of better distance penetration?
Within limits, narrow r-f bandwidth of an AM receiver can improve the intelligibility of the demodulated waveform, because that improves its signal-to-noise ratio. But that is a function of the receiver, not the transmitter.