Exhibit 13-2

-Suppose that the data in Exhibit 13-2 describes a shop that sells photocopies at $0.10 each. At this price, the marginal revenue product of the fourth machine is

Question

Exhibit 13-2
 
-Suppose that the data in Exhibit 13-2 describes a shop that sells photocopies at $0.10 each. At this price, the marginal revenue product of the fourth machine is

Quizplus · Accepted Answer

The marginal revenue product of the fourth machine is equal to the change in total revenue from adding a fourth machine divided by the change in the quantity of photocopies produced by adding the fourth machine. The change in total revenue from adding a fourth machine is $160 ($520 - $360), and the change in quantity is 400 (4000 - 3600). Therefore, the marginal revenue product of the fourth machine is $0.40 ($160/400). The best choice is to add the fourth machine since its marginal revenue product ($0.40) exceeds its marginal cost ($0.30).

Exhibit 13-2 -Suppose That the Data in Exhibit 13-2 Describes a Shop