Question

Calculate the total revenue if the firm produces 10 versus 9 units. Then, calculate the marginal revenue of the 10th unit produced. The marginal revenue of the 10th unit produced is

Answer 1

Complete Question:

If the price of an item is $3 per unit, calculate the total revenue if the firm produces 10 versus 9 units. Then, calculate the marginal revenue of the 10th unit produced. The marginal revenue of the 10th unit produced is ...

Answer:

a) The total revenue for 10 units = $30 ($3 * 10)

   The total revenue for 9 units = $27 ($3 * 9)

b) The marginal revenue of the 10th unit produced is $3 ($30 - $27).

Explanation:

a) Total revenue is a function of the selling price per unit and the quantity or units of sales.  For example, if a firm sells 5,000 units of its vehicle component at a unit price of $56, the total revenue will equal $280,000 (5,000 * $56).

b) The marginal revenue is the additional revenue that results from the sale of one additional unit of a product.  Another way of computing the marginal revenue is to divide the change in total revenue by the change in total output quantity.  This implies that marginal revenue is the additional price per unit of sales.