Question

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. when the same firm produces and sells 200 units of output, what is average revenue?

Answer 1

When the firm sells 100 units of output; the marginal revenue is $80.
When the firm sells 200 units of outpit: the marginal revenue is X.
So cross multiplying the revenue we have 100X = 80 * 200.
X = 200 * 80 / 100 = 16000/100 = $160. To calculate the average revenue,
we need to know the total revenue.
Total revenue is the Price (P) * Total output (Q).
So we have (80* 100) + ( 160 * 200) = 8000 + 32000 = 40000.
So the average revenue = Total revenue / Total output = 40000/ (100 +200) =
133.33