Calculation of Marginal Revenue

To calculate the marginal revenue, we need to understand the concept of total revenue and its relationship with the number of units sold. Marginal revenue refers to the change in total revenue resulting from the sale of one additional unit.

Given Information:
- Initial units sold: 20
- Final units sold: 35
- Increase in total revenue: $1200

Step 1: Calculate the Total Revenue at Both Levels
To calculate the marginal revenue, we first need to determine the total revenue at both levels.

For the initial level, where 20 units were sold, we do not have the exact value for the total revenue. However, we can assume a constant average revenue per unit to calculate it. Let's assume that the average revenue per unit is represented by 'A'. Therefore, the total revenue at the initial level would be 20A.

At the final level, where 35 units were sold, the total revenue increased by $1200. So, the total revenue at this level would be 20A + $1200.

Step 2: Calculate the Change in Total Revenue
To find the marginal revenue, we need to calculate the change in total revenue between the two levels.

Change in total revenue = Total revenue at the final level - Total revenue at the initial level
Change in total revenue = (20A + $1200) - 20A
Change in total revenue = $1200

Step 3: Calculate the Marginal Revenue
The marginal revenue is the change in total revenue divided by the change in the number of units sold.

Marginal revenue = Change in total revenue / Change in units
Marginal revenue = $1200 / (35 - 20)
Marginal revenue = $1200 / 15
Marginal revenue = $80

Explanation:
The marginal revenue of $80 indicates that for each additional unit sold, the total revenue increases by $80. This means that the revenue generated from the 21st unit is $80, from the 22nd unit is $80, and so on. Marginal revenue helps businesses understand the impact of each additional unit on their overall revenue and aids in decision-making regarding pricing, production levels, and sales strategies.

Note: The assumption of a constant average revenue per unit is made to simplify the calculation. In reality, the average revenue per unit may vary, and a more precise calculation can be done if the actual revenue data is available.