Calculation of Marginal Revenue

Marginal revenue is the additional revenue earned by selling one more unit of a product. It is calculated as the change in total revenue divided by the change in the quantity of the product sold.

Step 1: Calculate the change in total revenue

Change in total revenue = Total revenue from selling 120 units - Total revenue from selling 100 units

Change in total revenue = 14000 - 10000

Change in total revenue = 4000

Step 2: Calculate the change in quantity

Change in quantity = Quantity sold in the second transaction - Quantity sold in the first transaction

Change in quantity = 120 - 100

Change in quantity = 20

Step 3: Calculate marginal revenue

Marginal revenue = Change in total revenue / Change in quantity

Marginal revenue = 4000 / 20

Marginal revenue = 200

Therefore, the marginal revenue of the firm is 200.

Explanation of Marginal Revenue

Marginal revenue is an important concept in economics, especially in microeconomics. It helps firms to make decisions regarding pricing and production. When marginal revenue is positive, it means that selling one more unit of the product will increase the total revenue of the firm. This is a profitable situation for the firm, and it can continue to increase production until marginal revenue becomes zero or negative.

However, when marginal revenue is negative, it means that selling one more unit of the product will decrease the total revenue of the firm. This is an unprofitable situation for the firm, and it should reduce production to avoid losses.

In conclusion, marginal revenue is an important metric for firms to determine the optimal level of production and pricing. By calculating marginal revenue, firms can make informed decisions and maximize their profits.