Question

At which quantity does this firm produce the greatest marginal revenue? Quantity (Q) Total Revenue (TR) Marginal Revenue (MR) Total Cost (TC) Marginal Cost (MC) 1 1,200 ? 500 500 2 2,200 ? 775 275 3 3,400 ? 1,000 225 4 4,900 ? 1,250 250 5 5,500 ? 1,650 400 6 6,000 ? 2,500 850 7 6,500 ? 4,000 1,500 8 6,200 ? 6,400 2,400

Answer 1

Answer:

Producing 4 units yields the highest marginal revenue at 1500.

Explanation:

To calculate marginal revenue we look at the change in revenue figure compared to the change in units. In other words dividing the change in total revenue by the change in total output quantity.

Based on the information given these are the changes in marginal revenue per quantity.

1. 1200

2. 2200 - 1200 = 1000

3. 3400 - 2200 = 1200

4.  4900 - 3400 = 1500

5. 5500 - 4900  = 600

6. 6000 - 5500 = 500

7. 6500 - 6000 = 500

8. 6200 - 6500 = (300)

Thus based on the comparisons of the different quantities optimal marginal revenue is reached at 4 units of production. 1500 total marginal revenue