In: Economics
Quantity |
Total Cost |
495 |
1500 |
496 |
1505 |
497 |
1512 |
498 |
1520 |
499 |
1530 |
500 |
1545 |
501 |
1562 |
502 |
1580 |
23. The table above shows the total cost for Happy Cows, a perfectly competitive dairy farm, at various levels of production. The market price for Happy Cows dairy is $10 per unit of dairy product.
What is the marginal revenue of producing the 500th unit of dairy product?
A. $10
B. $15
C. $1,545
D. $5,000
24. The table shows the total cost for
Happy Cows, a perfectly competitive dairy farm, at various levels
of production. The market price for Happy Cows dairy is $10 per
unit of dairy product. What is the marginal cost of producing the
500th unit of dairy product?
A. $1,545
B. $5,000
C. $15
D. $10
23. The correct answer is $10
In perfectly competitive market, each firm is a price taker. All the firms have to accept the same price as determined by market forces of demand and supply. As a result uniform price prevails in the market. It means, revenue from every additional unit (known as marginal revenue) is equal to price. Price is given $10. Since price is equal to marginal revenue, therefore marginal revenue is $10.
24. The correct answer is $15
Marginal cost is the change in total cost when an additional unit of output is produced.
Marginal cost of producing 500th unit = Total cost of producing 500th unit - Total cost of producing 499th unit
Marginal revenue = $1545 - $1530 = $ 15