Question

Last year, BruceCo sold 1000 coffee cups for $10 each. This year, the company is plannin on selling 1500 coffee cups. In order to cover the additional investment they will charge $10.50 for the first 500 cups, $10.25 for the second 500 cups and $10 for the last 500. Each cup costs $4.70 to produce. What is the marginal revenue for the 1125th cup?a. $10.25b. $10.50c. $10.00d. $1,250e. $5.30

Answer 1

The answer is: E) $5.30

Step-by-step explanation:

The first 500 cups are sold at $10.50 per cup.

Then cups 501 to 1,000 are sold at $10.25 per cup.

Cups 1,001 and beyond are sold at $10 per cup.

The cost of producing one cup of coffee is $4.70 regardless of how many cups are produced.

The 1,125th cup will be sold at $10 and cost $4.70, the marginal revenue is $5.30.