Question

There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is:

Answer 1

$2.99

Step-by-step explanation:

Marginal revenue: This is the increase in revenue resulting from the sale of one additional unit of output. It follows the law of diminishing return.

It helps a firm identify the revenue generated from one additional unit of production.

It is calculated by dividing the change in total revenue by the change in total output quantity.

**Marginal revenue disregards the previous price of $3, as it only analyzes the incremental change.

Marginal revenue=change in total revenue/change in quantity sold.

At price $3

Output=199

At price $2.99

Output=200

Change in total revenue=

$2.99

Change in output=200-199=1

Marginal revenue=$2.99/1

=$2.99