Question

When perfectly competitive firm X sells three units of product Z, its marginal revenue is $4.67. When it sells 100 units, marginal revenue is $4.67. We can conclude that the price___________.a. is dropping.b. is $4.67.c. is too high.d. The price cannot be calculated with the information given.

Answer 1

is $4.67

Step-by-step explanation:

Marginal revenue of a company selling a product is the extra revenue realised from the sale of extra units of the product.

For example if 1 unit of a pen is sold at $5, the marginal revenue is 5/1= 5.

Also when 10 units are sold at $50, marginal revenue is 50/10= 5.

So for extra sales of product Z the marginal revenue is $4.67 showing that is the price per unit of Z, and it is constant.