If the quantity demanded for a hand-carved pineapple is two at a price of $16, and the quantity demanded will increase to three if the seller lowers the price to $14, what is the seller's marginal revenue from selling 3 units of pineapple?
A) $8
B) $24
C) $10
D) $14

Question

Quizplus · Accepted Answer

Marginal revenue is the change in total revenue resulting from a one-unit increase in sales. In this case, if the seller lowers the price from $16 to $14, the quantity demanded will increase from 2 to 3. So the total revenue at a price of $14 will be 3*$14 = $42. 
The marginal revenue from selling the third pineapple is the difference between the total revenue at 3 units sold ($42) and the total revenue at 2 units sold ($16), which is $42-$16 = $26. 
Therefore, the seller's marginal revenue from selling 3 units of pineapple is $26. However, the question only asks for the seller's best choice. In this case, the best choice would be to sell at a price of $14, since it results in the highest total revenue ($42) and the seller can sell more units.

If the Quantity Demanded for a Hand-Carved Pineapple Is Two