Forever Quilting is a company that designs and distributes quilting kits.The kits are priced at $120 each.The costs of the materials that go into each kit are $45.It costs $5 in labor to assemble a kit.The company has monthly expenses of $1,000 for rent and insurance,$200 for heat and electricity,$500 for advertising in quilting magazines,and $3,500 for the monthly salary of its owner.Forever Quilting's marginal revenue is
A)$50.
B)$70.
C)$120.
D)$3,500.
E)$5,200.

Question

Quizplus · Accepted Answer

Marginal revenue is the additional revenue gained from producing one more unit. In this case, Forever Quilting only produces one type of kit at a fixed price of $120 per kit. Therefore, the marginal revenue per kit is also $120 as producing one more kit will result in an additional revenue of $120. The costs of materials and labor are already included in the price and do not affect the marginal revenue. The monthly expenses and owner's salary are also fixed costs and do not affect marginal revenue. Therefore, the best choice is C, $120.

Forever Quilting Is a Company That Designs and Distributes Quilting