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9. This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. Quantity TO Price $50 $50 $50 $50 $10.00 $20.00 $27.50 $77.50 147.50 $250.00 0 4 $50 5 According to the table shown, the firms marginal revenue: A. is constant. B. increases as output increases. C. decreases as output increases. D. increases until the 3rd unit, then decreases.
business   economics   
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Answer #1

Revenue is the money a firm receives by selling a commodity. In other words the revenue of a firm is its sale receipts or money receipts from the sale of a product Revenue of a firm is calculated in three forms. They are total revenue, marginal revenuec and avcrage revcnuc Total Revenue It is the total money receipts of a firm from the sale of entire output. For example if thc product pricc is $50 and at that the firm sells a total output of 100 units, then the total revenue-100x $50 S5000 Marginal Revenue Marginal revenue is the addition to the total revenue when from the sale of an additional unit Avcragc Revenuc Average revenue is the revenue per unit of output sold. It is calculated by dividing the total revenue by the number of output sold The revenue is different from profit. Profit is Revenue-Cost but revenue is Cost+ profit. Thus in order to find out the revenue we dont want to consider the cost. To find out the marginal revenue, we need to simply look what is the net addition to the total revenue when one more unit is sold. The marginal revenue is calculated with the equation i.e MR- ATR AQ Change is total revenue divided by the change in quantity sold. For 1 unit of output the firm got S50. Here there is no additional quantity sold. The marginal revenuc is calculated from thc second unit because there is a changc in both total revenue and quantity sold. For the second unit the change is total revenue is $50 and the change in quantity sold is 1. Then MR- $50/1 - $50. When the firm sells the third unit the change total revenue is S50 and the change in quantity sold is 1. Thus, here the change in total revenue and change in quantity sols remain the same throughout the sale from unit to 5th units. Therefore marginal revenue throughout the sale is S50/1-S50. Therefore the marginal revenue remains the same or constant at $50 Answer: A- Constant

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