Using the table above, calculate the marginal revenue of five units.
Understand the Problem
The question is asking to calculate the marginal revenue for the production of five units based on the table provided with total revenues. This involves finding the difference in total revenue when production changes from four units to five units.
Answer
The marginal revenue for producing five units is $5$.
Answer for screen readers
The marginal revenue for producing five units is $5$.
Steps to Solve
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Identify Total Revenues for Units First, we need to identify the total revenue for producing four and five units from the table.
- For 4 units: Total Revenue = 37.5
- For 5 units: Total Revenue = 42.5
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Calculate Marginal Revenue Marginal revenue is calculated by finding the difference in total revenue when production increases from four units to five units. The formula for calculating marginal revenue is given by:
$$ \text{Marginal Revenue (MR)} = \text{Total Revenue at 5 units} - \text{Total Revenue at 4 units} $$
Substituting the values,
$$ MR = 42.5 - 37.5 $$
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Perform the Arithmetic Now, perform the subtraction to find the marginal revenue.
$$ MR = 42.5 - 37.5 = 5 $$
The marginal revenue for producing five units is $5$.
More Information
Marginal revenue helps businesses understand how much additional revenue they generate by increasing output. It is crucial for decision-making regarding production levels and pricing strategies.
Tips
- A common mistake is forgetting to subtract the total revenue of the previous output (four units) from the current output (five units). Always ensure you're using the correct revenues for the calculation.
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