Hi, I don't know if anyone can help me with a multiple choice question in Mock Exam B. The question says, Company Y faces a demand function for Good X given by: Q=100-P What is the marginal revenue obtained by Company Y on the sale of the 30th unit of Good X? A 39 B 40 C 41 D 42 The answer is 41 (C) which is obtained by finding TR for 29 units and for 30 units and subtract answers.So far so good. However I had tackled it in a different way by finding the function of MR as the derivative of TR which is good in my opinion.However such a working gives you an answer of 40 (B). Can anyone help me understand what i am missing? Thanks!
Hi If you were given the quantities that were demanded at each price level, you would plot the prices at the quanitity points. You would then work out the total revenues (price x output) and plot the total revenue at the quantity points. However, if you then worked out the marginal revenues, you would write them and plot them half-way between the quantity points to show that this is the extra revenue as you go from selling x to x+1. For example, if the price is 71, you will sell 29, making the total revenue 2059 and if the price is 70, you will sell 30, making the total revenue 2100. You would plot the marginal revenue of 41 at 29.5 units of output. Therefore, if you're trying to work out the MR of the 30th unit of output graphically, you need to put in quantity of 29.5, ie MR = 100-2(29.5) =41.
