Question

Microeconomics

Posted 5 months ago

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The price and total revenue for the monopoly firm Mammoth, Inc. based on the quantity it sells is shown in this table:
\begin{tabular}{lll}
Q & Price & Total revenue \\
\hline 0 & $\$ 20$ & $\$ 0$ \\
1 & $\$ 18$ & $\$ 18$ \\
2 & $\$ 16$ & $\$ 32$ \\
3 & $\$ 14$ & $\$ 42$ \\
4 & $\$ 12$ & $\$ 48$ \\
5 & $\$ 10$ & $\$ 50$ \\
6 & $\$ 8$ & $\$ 48$
\end{tabular}
What is the marginal revenue (MR) for the third unit and the fourth unit?
Choose 1 answer:
(A) $M R(3)=\$ 10 ; M R(4)=\$ 6$
(B) $M R(3)=\$ 10 ; M R(4)=\$ 10$
(c) $M R(3)=\$ 6 ; M R(4)=\$ 6$
(D) $M R(3)=-\$ 2 ; M R(4)=-\$ 2$
(ㄷ) $M R(3)=\$ 14 ; M R(4)=\$ 12$
```

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Answer from Sia

Posted 5 months ago

Solution

a

Definition of Marginal Revenue: Marginal Revenue (MR) is the additional revenue that a firm earns by selling one more unit of a good or service. It is calculated as the change in total revenue divided by the change in quantity

b

Calculation of MR for the third unit: To find the MR for the third unit, we need to calculate the change in total revenue when the quantity sold increases from 2 to 3 units. Using the table:
$MR(3) = \frac{TR(3) - TR(2)}{Q(3) - Q(2)} = \frac{42 - 32}{3 - 2} = 10$

c

Calculation of MR for the fourth unit: Similarly, to find the MR for the fourth unit, we calculate the change in total revenue when the quantity sold increases from 3 to 4 units. Using the table:
$MR(4) = \frac{TR(4) - TR(3)}{Q(4) - Q(3)} = \frac{48 - 42}{4 - 3} = 6$

Answer

(A) $M R(3)=\$ 10 ; M R(4)=\$ 6$

Key Concept

Marginal Revenue (MR)

Explanation

Marginal Revenue is the additional revenue from selling one more unit. For the third unit, MR is $10, and for the fourth unit, MR is$6, calculated from the changes in total revenue.

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