CA Foundation · Business Economics · Price Determination in Different Markets
A firm's demand (AR) curve is the straight line P = 40 - 2Q. What is its marginal revenue at Q = 5?
Marginal revenue at Q = 5 is ₹20. Total revenue is 40Q - 2Q², so MR is the derivative, 40 - 4Q, which equals 20 at Q = 5. The price at that output is ₹30, which is average revenue, not marginal revenue.
- A₹30
- B₹20Correct
- C₹10
- D₹15
Explanation
TR = P×Q = 40Q - 2Q². MR = dTR/dQ = 40 - 4Q. At Q = 5, MR = 40 - 20 = ₹20. The ₹30 figure is the price (AR) at Q = 5, so using it confuses AR with MR.
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