When a firm in a competitive market produces 10 units of output, it has a marginal revenue of $5 what is the firm's total revenue when it produces 9 units of output?

Question

Quizplus · Accepted Answer

Marginal revenue is the change in total revenue from producing one more unit of output. If the marginal revenue for 10 units is $5, then the total revenue for 10 units is (10 x $5) = $50. Therefore, the average revenue per unit for 10 units is ($50/10) = $5. 
Now, if the firm produces 9 units instead of 10, the total revenue will be less than $50. However, we don't know exactly how much less without more information. 
But, we can use the fact that the marginal revenue is $5 to make an assumption. Since the marginal revenue is the change in total revenue from producing one more unit of output, we can assume that the total revenue for the first 9 units is $5 less than the total revenue for the first 10 units. Therefore, the total revenue for 9 units would be ($50 - $5) = $45.

When a Firm in a Competitive Market Produces 10 Units