Question

Bennie’s Radiator Shop has installed a new machine that increases production by 200 units. Each unit sells for $30. What is the marginal revenue product of the new machine? a. $6,000 b. $30 c. $170 d. 200 units e. Insufficient data

Answer 1

Answer:

B. $30

Explanation:

Marginal revenue is the revenue gained from the sale of an additional unit. It is calculated by dividing the change in total revenue by change in total output quantity.

That is

MR = Change in Total Revenue/

Change in quantity sold

In the question,

Change in quantity sold = 200 unit

Change in total revenue at $30 per unit = 30 × 200 = $6000

Therefore,

MR = 6000/200

= $30