Skip to content

CMA Final · Strategic Cost Management · Business Application of Maxima and Minima

A firm's revenue is R = 50x - x^2 and cost is C = 10x + 100 (in rupees thousand, x in hundreds of units). At the profit-maximising output, what is the marginal revenue?

Marginal revenue at the profit-maximising output is Rs 10 thousand. Profit is maximised where MR equals MC; MR = 50 - 2x and MC = 10 give x = 20, so MR equals the constant marginal cost of 10.

  1. ARs 10 thousandCorrect
  2. BRs 20 thousand
  3. CRs 30 thousand
  4. DRs 40 thousand

Explanation

Marginal revenue = 50 - 2x and marginal cost = 10. Profit is maximised where MR = MC: 50 - 2x = 10, so x = 20. MR at x = 20 equals 10, which equals MC. Choosing 30 results from using MR = 50 - x.

Did you get it right without looking?

One question tells you little. A timed set on Business Application of Maxima and Minima shows your real accuracy, how long you take and where you lose marks.

Practise Business Application of Maxima and MinimaFree diagnostic mock

More Business Application of Maxima and Minima questions