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s.h_math s.h_math
wrote...
Posts: 294
Rep: 3 0
2 years ago
Attached is the question I need help on.

Your firm has a marginal revenue given by the equation 30 — Q. This means that the third unit Of output brings in 30 — 3 = $27 Of additional
revenue. The marginal cost for your firm is MC= 10 + Q; thus, the third unit increases cost by 10 + 3 = $13.
If you are currently producing two units, is it a good idea to increase production so that you produce a third unit?
o
A.
o
B.
No, the third unit costs more to produce than the benefit received from producing it since marginal revenue is less than marginal cost.
Yes, the difference between marginal revenue and marginal cost for the third unit is greater than it is for the second unit.
Yes, the third unit provides more revenue than it costs to produce since marginal revenue is greater than marginal cost.
No, you get less additional benefit from the third unit than the second so you should not produce the third.
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wrote...
Educator
2 years ago
Yes, the third unit provides more revenue than it costs to produce since marginal revenue is greater than marginal cost.

MR = MC

30 - Q = 10 + Q

30 - 10 = Q + Q
20 = 2Q
Q = 10

Therefore, firm should produce till quantity (Q)=10 units as MR = MC at that point.
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