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, follow these steps:
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Calculate the total revenue before the price drop: Total revenue = Price * Quantity Total revenue = 2000
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Calculate the total revenue after the price drop: Total revenue = Price * Quantity Total revenue = 2079
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Calculate the change in revenue: Change in revenue = Total revenue after price drop - Total revenue before price drop Change in revenue = 2000 = $79
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Calculate the change in quantity: Change in quantity = Quantity after price drop - Quantity before price drop Change in quantity = 21 - 20 = 1
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Finally, calculate the marginal revenue: Marginal revenue = Change in revenue / Change in quantity Marginal revenue = 79
So, the marginal revenue is $79.
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