As a firm increases its output from five to six units, its total revenue grows from $400 to $500 and its total cost grows from $350 to $400. As the firm's output increases from five to six units marginal revenue exceeds marginal cost by:
A) $0.
B) $50.
C) $100.
D) $150.

Question

Quizplus · Accepted Answer

The marginal revenue (MR) from increasing output from 5 to 6 units is the change in total revenue, which is $500 - $400 = $100. The marginal cost (MC) for the same increase is the change in total cost, which is $400 - $350 = $50. Therefore, MR exceeds MC by $100 - $50 = $50.

As a Firm Increases Its Output from Five to Six