How do I find the marginal revenue in the question in this link?

1 Answer

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The marginal revenue is found by calculating how much more revenue is received by the firm when it produces and sells another unit of its product.  In the case of the table about which you are asking, the unit is a kilogram of product.  You must be careful to take this into account because the table gives revenues for products in increments of 100 kg.

What you must therefore do is to subtract the original revenue from the revenue after the sale of the additional 100 kg.  You must then take that total and divide it by 100 to get the dollars/kilogram marginal revenue that is asked for.

So, for example, when the firm made 100 kg, it earned $48 in total revenue.  But when it made 200 kg, it earned $96 in total revenue.  This is an increase of $48.  Dividing $48 by 100, we get $.48.  This means that the marginal revenue for making the next 100 kg (from 100 to 200 kg) was $.48 per kilogram.

You will note that this is the marginal revenue for every increment in this table.  This is because the firm is in perfect competition and its price remains the same at every production level.