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Suppose that a firm in a competitive market faces the following prices and costs: Price Quantity Total Cost $6 0 $4 $6 1 $6 $6 2 $9 $6 3 $13 $6 4 $18 $6 5 $24 $6 6 $31 The marginal revenue from producing the 5th unit equals: i) $6 ii) the price iii) the marginal cost
Suppose that a firm in a competitive market faces the following prices and costs:
| Price | Quantity | Total Cost |
| $6 | 0 | $4 |
| $6 | 1 | $6 |
| $6 | 2 | $9 |
| $6 | 3 | $13 |
| $6 | 4 | $18 |
| $6 | 5 | $24 |
| $6 | 6 | $31 |
The marginal revenue from producing the 5th unit equals:
i) $6
ii) the price
iii) the marginal cost.
a. (i) only
b. (i) and (ii) only
c. (iii) only
d. (i), (ii), and (iii)
Expert Solution
The correct answer to the given question is option d. (i), (ii), and (iii).
| Price | Quantity | Total Cost | Revenue (Price * Quantity) | Marginal Revenue (Revenue_2 - Revenue_1) | Marginal Cost (Total Cost_2 - Total Cost_1) |
| $6 | 0 | $4 | = $6 * 0 = $0 | $0 | $0 |
| $6 | 1 | $6 | = $6 * 1 = $6 | = $6 - $0 = $6 | = $6 - $4 = $2 |
| $6 | 2 | $9 | = $6 * 2 = $12 | = $12 - $6 = $6 | = $9 - $6 = $3 |
| $6 | 3 | $13 | = $6 * 3 = $18 | = $18 - $12 = $6 | = $13 - $9 = $4 |
| $6 | 4 | $18 | = $6 * 4 = $24 | = $24 - $18 = $6 | = $18 - $13 = $5 |
| $6 | 5 | $24 | = $6 * 5 = $30 | = $30 - $24 = $6 | = $24 - $18 = $6 |
| $6 | 6 | $31 | = $6 * 6 = $36 | = $36 - $30 = $6 | = $31 - $24 = $7 |
From the above table, it can be inferred that the marginal revenue from producing the 5th unit is $6 which is same as the marginal cost and the price (i.e $6).
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