Question

Cogswell Corporation is considering how to price their patented mega-cogs. It knows that if it prices each widget at $50 then they won't sell any widgets. A price of $45 brings a sale of only 1 unit. A price of $40 brings the a sale of 2 units. Finally, a price of $35 brings a sale of 3 units. The Marginal Revenue (MR) of the third unit is:

Answer 1

Answer: $25

Step-by-step explanation:

Total revenue, at price = $50

Total revenue = price × units sold

= $50 × 0

= 0

Total revenue, at price = $45

Total revenue = price × units sold

= $45 × 1

= $45

Total revenue, at price = $40

Total revenue = price × units sold

= $40 × 2

= $80

Total revenue, at price = $35

Total revenue = price × units sold

= $35 × 3

= $105

Marginal revenue of third unit =
`(Change\ in\ total\ revenue)/(change\ in\ units\ sold)`

=
`(105 - 80)/(3 - 2)`

= $25