Multiple Choice
In the short run, if marginal cost exceeds average total cost, what happens to average total cost as output increases?
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0. Basic Principles of Economics
Marginal Analysis
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Suppose a firm's total revenue increases from 100 to 108 when it sells the 11th unit of output. What is the marginal revenue received from the 11th unit?
A
108
B
100
C
11
D
8
Verified step by step guidance1
Identify the total revenue before selling the 11th unit, which is given as 100.
Identify the total revenue after selling the 11th unit, which is given as 108.
Recall that marginal revenue (MR) is the additional revenue gained from selling one more unit of output.
Use the formula for marginal revenue: \(MR = TR_{new} - TR_{old}\), where \(TR_{new}\) is the total revenue after selling the additional unit, and \(TR_{old}\) is the total revenue before selling that unit.
Calculate the marginal revenue from the 11th unit by subtracting the total revenue before selling the 11th unit from the total revenue after selling it: \(MR = 108 - 100\).
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