Homework SourseGiven the information in the table at right calculate the dr
Given the information in the table at right, calculate the dry cleaner\'s marginal revenue (MR) and marginal cost (MC) at each output level. (Your answer should be rounded to the nearest cent.)
Output
(Suits Cleaned)
Price per Suit ($)
Total Costs ($)
Total Revenue ($)
MC ($)
MR ($)
0
12.0012.00
3.00
0.000.00
minus
minus
1
11.5011.50
6.00
11.5011.50
nothing
nothing
2
11.0011.00
8.50
22.0022.00
nothing
nothing
3
10.5010.50
10.50
31.5031.50
nothing
nothing
4
10.0010.00
11.50
40.0040.00
nothing
nothing
5
9.509.50
13.5013.50
47.5047.50
nothing
nothing
6
9.009.00
20.0020.00
54.0054.00
nothing
nothing
7
8.508.50
28.0028.00
59.5059.50
nothing
nothing
8
8.008.00
32.0032.00
64.0064.00
nothing
nothing
| Output (Suits Cleaned) | Price per Suit ($) | Total Costs ($) | Total Revenue ($) | MC ($) | MR ($) |
| 0 | 12.0012.00 | 3.00 | 0.000.00 | minus | minus |
| 1 | 11.5011.50 | 6.00 | 11.5011.50 | nothing | nothing |
| 2 | 11.0011.00 | 8.50 | 22.0022.00 | nothing | nothing |
| 3 | 10.5010.50 | 10.50 | 31.5031.50 | nothing | nothing |
| 4 | 10.0010.00 | 11.50 | 40.0040.00 | nothing | nothing |
| 5 | 9.509.50 | 13.5013.50 | 47.5047.50 | nothing | nothing |
| 6 | 9.009.00 | 20.0020.00 | 54.0054.00 | nothing | nothing |
| 7 | 8.508.50 | 28.0028.00 | 59.5059.50 | nothing | nothing |
| 8 | 8.008.00 | 32.0032.00 | 64.0064.00 | nothing | nothing |
Solution
Revenue is the sale proceeds. total revenue is the total sale proceeds from the quantity sold. Marginal revenue (MR) is the change in total revenue due to one unit change in quantity sold.
Similarly consider total cost(TC). Change in total cost due to one unit change in quantity produced is known as marginal cost (MC). It is show in the table below:
In the above table Mr has bee ascertained by deducting TR of Q units sold from TR of Q+1 unit sold. Here TR of say 3rd unit is 31.50 and TR of 2nd unit is 22.00. Thus MR of 3rd unit is 31.50-22=9.50. Usually it should be at par with the price of marginal unit. But here it is less than price (10.50). Thus you can assume that some discount has been allowed on sale of marginal unit on price.
In the same manner MC has been ascertained from TC. Here TC of 3 units is 10.50 and TC of 2 units is 8.50. Thus MC of 3rd unit is 10.50-8.50=2.
| Quantity | Price per | Total cost | Total | Change in | Change in TR |
| of suit | suit | Revenue | TC (i.e. MC) | (i.e. MR) | |
| 0 | 12.00 | 3.00 | 0.00 | ||
| 1 | 11.50 | 6.00 | 11.50 | 3.00 | 11.50 |
| 2 | 11.00 | 8.50 | 22.00 | 2.50 | 10.50 |
| 3 | 10.50 | 10.50 | 31.50 | 2.00 | 9.50 |
| 4 | 10.00 | 11.50 | 40.00 | 1.00 | 8.50 |
| 5 | 9.50 | 13.50 | 47.50 | 2.00 | 7.50 |
| 6 | 9.00 | 20.00 | 54.00 | 6.50 | 6.50 |
| 7 | 8.50 | 28.00 | 59.50 | 8.00 | 5.50 |
| 8 | 8.00 | 32.00 | 64.00 | 4.00 | 4.50 |
