CA Foundation · Business Economics · Price Determination in Different Markets
A firm's total revenue is ₹400 when it sells 8 units and ₹450 when it sells 9 units. What is the marginal revenue of the 9th unit, and what is the average revenue at 9 units?
Marginal revenue of the 9th unit is ₹50, found as the change in total revenue (450 minus 400). Average revenue at 9 units is 450 divided by 9, which is also ₹50. Both being equal indicates the firm sells at a constant price.
- AMR = ₹50; AR = ₹50Correct
- BMR = ₹50; AR = ₹45
- CMR = ₹45; AR = ₹50
- DMR = ₹450; AR = ₹50
Explanation
MR of the 9th unit = TR9 - TR8 = 450 - 400 = ₹50. AR at 9 units = 450/9 = ₹50. The option with AR = ₹45 wrongly uses a wrong divisor. Here MR equals AR, which is the case where price is constant.
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