Consider the following case: price is $100 and 20 units are sold, then price drops to $99 and 21 units are sold.Calculate the marginal revenue: $________.
Question
Consider the following case: price is 99 and 21 units are sold.Calculate the marginal revenue: $________.
Solution
To calculate the marginal revenue, we need to follow these steps:
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Calculate the total revenue before the price drop: This is done by multiplying the price by the quantity sold. So, 2000.
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Calculate the total revenue after the price drop: Again, this is done by multiplying the new price by the new quantity sold. So, 2079.
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Subtract the total revenue before the price drop from the total revenue after the price drop to find the change in total revenue: 2000 = $79.
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The marginal revenue is the change in total revenue divided by the change in quantity. The change in quantity is 21 - 20 = 1.
So, the marginal revenue is 79.
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