How would the discount effect on marginal revenue differ for a seller increasing sales from 100 units to 101 units compared to an increase in sales from 1,000 units to 1,001 units?
A)The discount effect would be the same in both situations and would be less than price.
B)The discount effect would be the same in both situations and would be larger than price.
C)The discount effect would be smaller for a change from 100 to 101 units than 1,000 to 1,001 units.
D)The discount effect would be larger for a change from 100 to 101 units than 1,000 to 1,001 units.

Question

Quizplus · Accepted Answer

The discount effect is the decrease in revenue per unit caused by offering a discount to customers. As the number of units sold increases, the impact of the discount on marginal revenue decreases. Therefore, the discount effect would be smaller for a change from 100 to 101 units compared to 1,000 to 1,001 units, as the latter change represents a larger increase in units sold.

How Would the Discount Effect on Marginal Revenue Differ for a Seller