Business College

Question 3
A car manufacturer notices that they can sell 11 cars at £18,200, but in order to sell 12 cars they have to
drop the price to £17,400. The marginal cost of producing the 12th car is £9,000. Which of the following
statements is correct?
a) The marginal revenue from selling the 12th car is £18,200.
b) The loss in total revenue of increasing the total number of cars sold from 11 to 12 cars is £800.
c) The marginal revenue when the output is 11 cars is £8,600.
d) The firm should increase its output to maximise its profits.

Answers

Answer 1

Answer:

b) The loss in total revenue of increasing the total number of cars sold from 11 to 12 cars is £800.

Explanation:

Marginal revenue is the benefit associated with the sale of one more unit, while marginal costs are the expenses incurred in producing an extra unit. To determine the marginal revenue, one has to isolate the revenue from the last item sold with revenue from the previous units.

In this case, the marginal revenue will be the price of the 12th item minus the price of the 11th item.

Marginal revenue =$17,400 -$18,200

=-$800

Marginal revenue = - $800

Answer 2

The statement that is correct is B. The loss in total revenue of increasing the total number of cars sold from 11 to 12 cars is £800.

Marginal revenue implies the additional revenue that's made as a result of an extra unit sold. Marginal cost is the extra cost incurred as a result of an additional unit produced.

Based on the information given, the marginal revenue will be:

= $17400 - $18200

= -$800.

Therefore, there'll be a loss of $800.

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Related Questions

What is the term used to describe the dollar amount of a physical damage claim paid by the policyholder?A. Coinsurance clause.
B. Floater.
C. Deductible.

Answers

Answer:

C. Deductible.

Explanation:

Variable universal life insurance is insurance that provides permanent insurance coverage as whole life does; however the policyholder, not the insurance company, takes on the investment risk.

A Variable universal life insurance is a type of permanent life insurance policy which avails the holder the opportunity of investing the cash component of the plan (policy) for a much greater returns and as such the investment risk associated with the policy lies completely on the policy holder and not the insurance company.

Additionally, a group life insurance policy can be defined as a single contract plan that covers a group of people by providing life insurance coverage. An employer may opt for a group life insurance policy which would cover the lives of his or her employees.

Deductible is the term used to describe the dollar amount of a physical damage claim paid by the policyholder.

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