Question

The table below represents the hourly output and cost structure for a local pizza shop. The market is perfectly competitive, and the market price of a pizza in the area is $10. Total costs include all implicit opportunity costs. Marginal Calculate the pizza shop's marginal cost and marginal revenue at each rate of output and fill in the values in the table Total Economic Marginal Total Hourly Cost (S) Total Revenue (S) Cost () Revenue (S) Total Hourly Output and Sales of Pizzas Profit ($) 10 20 20 10 28 12 70 40 80 52 100 32 10

Answer 1

Marginal revenue is the increase in the total revenue when an extra unit of output is sold.

Marginal cost is the increase in the total cost when an extra unit of output is produced.

Marginal revenue is found by subtracting the total revenue of current output level and the preceding output level.
For example at output level 2, the marginal revenue is calculated by subtracting the total revenue at output level 1 from the total revenue at output level 2 which is equal to (20 - 10) $10.

Similarly, marginal cost is calculated
by subtracting the total cost at output 1 from the total cost at output level 2 which is equal to (9 -7) $2.

Output Total cost Marginal Cost

0 3 -----

1 7 4

2 9 2

3 10 1

4 12 2

5 16 4

6 22 6

7 30 8

8 40 10

9 52 12

10 68 16

  

Output Total Revenue Marginal Revenue

0 0 0

1 10 10

2 20 10

3 30 10

4 40 10

5 50 10

6 60 10

7 70 10

8 80 10

9 90 10

10 100 10