Question

Which is correct to measure Marginal Revenue ?

• A. \( MR = TR_n - TR_{n-1} \)
• B. \( MR = \Delta TR / \Delta Q \)
• C. Both (a) and (b)
• D. None of the above

Hint:

Use \( TR_n - TR_{n-1} \) for tables where quantity increases by 1. Use \( \Delta TR / \Delta Q \) for larger jumps in quantity.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Marginal Revenue (MR) measures the change in Total Revenue (TR) resulting from a one-unit change in the quantity sold (\( Q \)).
Step 2: Detailed Explanation:
1. Discrete Method: If we want to find the MR of the \( n \)-th unit, we subtract the TR of \( n-1 \) units from the TR of \( n \) units. This is shown in Option (A).
2. General/Change Method: If the change in quantity is more than one unit, we use the ratio of total change in revenue to total change in quantity. This is shown in Option (B).
Both are mathematically valid definitions of the same economic concept.
Step 3: Final Answer:
Since both formulas are standard ways to calculate MR, Option (C) is correct.