Question

Assume that a demand equation is giben by q = 5000-100p. Find the marginal revenue for the given production levels (levels of q). (Hint: Solve the demand equation for p and use R(q) = qp)

A. 500 units B. 2500 units C. 5500 units

Answer 1

A) 40

B) 0

C) -60

Explanation:

q = 5000 - 100p

p = (5000 - q)/100

p = 50 - q/100

Revenue = pq

= (50 - q/100)q

= 50q - q²/100

dR/dq = 50 - 2q/100

dR/dq = 50 - q/50

A) q = 500,

dR/dq = 50 - (500/50) = 40

B) q = 2500,

dR/dq = 50 - (2500/50) = 0

C) q = 5500,

dR/dq = 50 - (5500/50) = -60