Question

Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of hats."Using marginal analysis terminology, another economic term for the incremental revenue received from the sale of the last 300 hats isQuestion options:A. gross profit.B. gross earnings.C. marginal revenue.D. sales revenue.

Answer 1

Answer:

The correct option is (C)

Explanation:

Marginal revenue refers to the revenue generated as a result of selling an additional unit of product. It is another term for incremental revenue. Marginal analysis is analyzing and comparing additional benefit (revenue) earned against cost incurred on the same.

Here, company is analyzing revenue as compared to the cost incurred in producing 300 hats. So, incremental revenue earned from selling 300 hats is called marginal revenue.