Question

Answer the next two (2) questions on the basis of the demand schedule shown below:
Price                                                    Quantity Demanded
$7                                                                 1
6                                                                   2
5                                                                   3
4                                                                   4
3                                                                   5
The marginal revenue obtained from selling the third unit of output:

a	is $5
b	is $3
c	Is $1
d	Is $6
e	Cannot be determined from the information given.

At the point where 3 units are being sold, the elasticity of demand:

a	Is greater than unity.
b	Is low than unity.
c	Suggests that the market is purely competitive.
d	Cannot be estimated.

Answer 1

Please see the answer below:

Pase 1 TR= PXa 5 3 15 4 16 15 5 MR at nth unit is given by MRn= TRn-TRn- art 3od unit of ort put m-3 TR3-TR2 MR 3 (frm table 15 12 3 cOvred corect So, option MR3 IS $3 Elasticity f Demand is caleuloted as Ed = -A0 AP cuhere AP = P-P the quanhty at 3 units of output, a, 3 &= 2 a r new / & P,=5& P= 6 Cay-a 3-2=

Page 2 AP = PP - =5-6 So, Ed at 3rd unit of Output P AP (-1) 2 Ed1 coTrect S, option a.