CMA Foundation · Fundamentals of Business Economics and Management · Cost of Production
A firm sells 10 units at ₹50 each. To sell 11 units it must reduce the price of all units to ₹48. What is the marginal revenue of the 11th unit?
Marginal revenue is the change in total revenue from selling one more unit. Total revenue rises from ₹500 (10 × 50) to ₹528 (11 × 48), so MR is ₹28. It is lower than the price ₹48 because the price cut applies to all earlier units too.
- A₹48
- B₹2
- C₹28Correct
- D₹50
Explanation
TR at 10 units = 10 × 50 = ₹500. TR at 11 units = 11 × 48 = ₹528. MR = 528 − 500 = ₹28. Taking MR as the new price (₹48) ignores the revenue lost on the first 10 units, which each now sell ₹2 lower.
Did you get it right without looking?
One question tells you little. A timed set on Cost of Production shows your real accuracy, how long you take and where you lose marks.
More Cost of Production questions
- A bakery in Pune produces 10 cakes at a total cost of ₹2,000. What is the average cost per cake?
- Which of the following is an example of an internal economy of scale for a manufacturing firm?
- In the short run, which of the following costs does NOT change when a firm increases its output from 100 units to 200 units?
- The long-run average cost (LAC) curve is often described as an 'envelope curve'. This is because it:
- A firm in a perfectly competitive market sells each unit of its product at a constant price of ₹40. What is true about its average revenue (…
- A factory produces 100 units at a total cost of ₹5,000 and 101 units at a total cost of ₹5,030. What is the marginal cost of the 101st unit?