Suppose a monopolistically competitive firm sells 25 units at a price of $10.What is its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9?
A)$270
B)$20
C)$4
D)$2.50

Question

Quizplus · Accepted Answer

The marginal revenue is calculated by the change in total revenue divided by the change in quantity. Initially, the firm sells 25 units at $10, so total revenue is $250. After reducing the price to $9, it sells 30 units, so total revenue is $270. The change in total revenue is $270 - $250 = $20, and the change in quantity is 5 units. Therefore, marginal revenue is $20 / 5 = $4.

Suppose a Monopolistically Competitive Firm Sells 25 Units at a Price