• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Marignal Revenue

K

kika258

Member
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.
 
You must log in or register to reply here.
Back
Top