Question

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Cost Data Demand Data Total Output Total Cost Quantity Demanded Price 0 $25 0 $60 1 40 1 55 2 45 2 50 3 55 3 45 4 70 4 40 5 90 5 35 6 115 6 30 If the firm sells 3 units of output, marginal revenue will be _______.

Answer 1

Answer:

$35

Explanation:

Note the formula:

Total revenue (TR)= Price (P) x Q and Marginal revenue (MR) = Change in TR / Change in Q

Total Revenue for 2 units of output sold

= 2 x $50 = $100

Total Revenue for 3 units of output sold

= 3 x $45 = $135

The Marginal Revenue=

Change in TR (135-100) / Change in quantity (3-2)

= $35/1

= $35

Therefore, the Marginal Revenue If the firm sells 3 units of output, will be $35.