Natasha owns the only vehicle charging station in town. She currently charges $9.50 to charge a car and has twenty customers per day. Suppose that Natasha drops the price to $9.25 and this leads to twenty-one customers per day. What is the marginal revenue from the twenty-first customer?

Question

Quizplus · Accepted Answer

The marginal revenue from the twenty-first customer is calculated by the increase in total revenue from serving one additional customer, minus the decrease in revenue from lowering the price for all customers. Initially, Natasha earns $9.50 * 20 = $190. After dropping the price to $9.25, she earns $9.25 * 21 = $194.25. The marginal revenue is $194.25 - $190 = $4.25.

Natasha Owns the Only Vehicle Charging Station in Town