Refer to Table 10-1. What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?
A) output effect = $24.00; price effect = $19.50
B) output effect = $6.50; price effect = $2.00
C) output effect = -$0.50; price effect = $5.00
D) output effect = $6.00; price effect = -$1.50

Question

Quizplus · Accepted Answer

The output effect is the additional revenue from selling one more unit at the new price, while the price effect is the loss in revenue from selling all previous units at the lower price. The given values suggest that the output effect is $6.00 and the price effect is -$1.50.