Question

A firm sells peanuts in a perfectly competitive market. Upon increasing production output from 60 packages to 75 packages, the total revenue increased from $300 to $375. What was the marginal revenue of this increase in production?

Answer 1

Marginal revenue is calculated by taking the change in total revenue divided by the change in quantity sold. In this case, the marginal revenue for the firm when it increased production from 60 to 75 packages is $5 per package.

Step-by-step explanation:

The question is about calculating marginal revenue for a firm that sells peanuts in a perfectly competitive market. To find the marginal revenue of the increase in production, we subtract the initial total revenue from the new total revenue and then divide by the change in quantity sold. Given that the firm's total revenue increased from $300 to $375 by selling 15 more packages (from 60 to 75 packages), the marginal revenue is calculated as follows:

MR = (New Total Revenue - Initial Total Revenue) / (New Quantity - Initial Quantity)

MR = ($375 - $300) / (75 - 60)

MR = $75 / 15

MR = $5

Therefore, the marginal revenue from increasing production output from 60 to 75 packages is $5 per package.