A bakery can sell 800 cupcakes at $3 each, or 1,000 cupcakes at $2.50 each. Option (c) $0.50 is the correct answer.
To compute the marginal revenue, you have to divide the change in its total revenue by the change in its total output quantity.
Marginal revenue is equal to the selling price of an item that was sold.
The marginal revenue associated with cupcakes of 800 from 1,000.
Marginal Revenue= Change in Revenue/ Change in Quantity
= (Current Revenue - Initial Revenue) / (Current Product Quantity - Initial Product Quantity)
= (1000*2.50) - (800*3) / 1000 - 800
= 2500 - 2400 / 200
= 100/200
= ½
=0.5
= $0.50
Marginal Revenue
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