Marginal Revenue Calculations
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The demand equation faced by DuMont Electronics for its personal computers is given by P=1000-4Q.
a. Write the marginal revenue equation.
b. At what price and quantity will marginal revenue be zero?
c. At what price and quantity will marginal revenue be maximized?
d. If price is increased from $6000 to $7000 what will the effect on total revenue? What does this imply about price elasticity?
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The solution answers a lot of questions about the marginal revenue concept.
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Answer (a):
P = 1000 - 4Q
Total Revenue = PxQ = 1000Q - 4Q^2
Marginal Revenue = 1000 - 8Q (first order derivative of Total Revenue)
Answer (b):
Marginal Revenue = 0
=> 1000 - 8Q = ...
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