Question

You own a company that produces widgets (an economic term frequently used to represent any product manufactured in a market). You currently produce 100 widgets; each widget sells for $100 and costs $80 to produce. You are considering increasing your company’s production by one unit, upping the total to 101 widgets. At this level of production,total revenue will increase to $10,100, and total cost will increase to $8,120.What is the marginal revenue and the marginal cost of making this change?
A.)MR=$10,000 and MC=8,000

B.)MR=$100 and MC=$120

C.)MR=$10,100 and MC=8,120

D.)MR=$100 and MC=$80

Answer 1

The increase in the company's products in one unit will increase Marginal Revenue to increase by $100 and Marginal Cost to increase by $120.

Marginal Revenue and Marginal Cost

Marginal Revenue

It is referred to as the change in the revenue value due to the selling of an additional product. In the question given above, the revenue for producing 100 units is $10,000 ($100 x 100 units). So, when 1 additional unit is produced the extra revenue earned is $100 ($10,100 - $10,000). Therefore, the marginal revenue is $100.

Marginal Cost

It is referred to as the extra cost for producing an additional unit. In the given scenario, the cost for producing the 100 units is $8,000 (100 units x $80). When producing an additional unit the cost goes up to $8,120. Therefore, the marginal cost for producing an additional unit is $120 ($8,120 - $8,000).

The Bottom Line

Companies used the details on marginal revenue and marginal cost to:

• Determine Ideal production levels

• Calculate their profitability rate

• Prepare plans to remain competitive and profitable

Hence, the Marginal Revenue and Marginal Cost for one additional unit are $100 and $120 respectively.

Learn more on Marginal Revenue and Marginal Cost here: brainly.com/question/16615264