McRobert's TV Shop sells 400 sets per month, at a price of $600 per unit. Market research indicates that the shop can sell one additional set for each $1 it reduces the price. The total revenue (in dollars) is given by , where x is the number of additional sets beyond the original 400. What is the marginal revenue if 300 more units are sold?

Question

McRobert's TV Shop sells 400 sets per month, at a price of $600 per unit. Market research indicates that the shop can sell one additional set for each $1 it reduces the price. The total revenue (in dollars) is given by  , where x is the number of additional sets beyond the original 400. What is the marginal revenue if 300 more units are sold? ​

Quizplus · Accepted Answer

To find the marginal revenue for selling 300 more units, we need to find the revenue generated from selling 700 units (400 original + 300 additional units) and subtract the revenue generated from selling 400 units (original units only).

Revenue from selling 400 units = 400 x $600 = $240,000

To find the revenue generated from selling 700 units, we need to determine how much we need to reduce the price to sell an additional 300 units. From the problem statement, we know the shop can sell one additional set for each $1 it reduces the price. Therefore, we need to reduce the price by $300 to sell 300 additional units.

New price per unit = $600 - $300 = $300

Total revenue from selling 700 units = (400 + 300) x $300 = $210,000

Marginal revenue = Total revenue from selling 700 units - Total revenue from selling 400 units
= $210,000 - $240,000
= -$30,000

So, the marginal revenue for selling 300 more units is -$30,000, which means that the cost of producing and selling those additional units is greater than the revenue generated from selling them. The best choice would be to focus on selling the original 400 units at the current price rather than reducing the price to sell more units.

McRobert's TV Shop Sells 400 Sets Per Month, at a Price