Question

A single-price monopoly can sell 2 units for $8.50 per unit. in order to sell 3 units, the price must be $8.00 per unit. the marginal revenue from selling the third unit is

Answer 1

Marginal revenue is the ratio that is calculated in order to account for the change in overall income that results from selling one additional unit. This term is usually considered a microeconomic term but has many managerial accounting applications.

The formula to be used is,
Marginal revenue = (change in total revenues)/(change in quantity sold)

Revenue for 2 units sold: R = (2 units)($8.50/unit) = $17
Revenue for 3 units sold: R = (3 units)($8.00/unit) = $24

Change in Total Revenue = $24 - $17 = $7

Marginal Revenue = ($7) / (3 - 2) = $7/1

ANSWER: Marginal Revenue: $7/unit