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F CO is a car manufacturer. One of its division makes the V2 part used in car engines and can sell them internally to another division within the same company or to external customer. The external market is imperfect and the division faces a downward slopping linear to demand curve. Sales of 50000 units can be made if the V2 is sold at $30 per unit but fall to 45000units if the price increase to $32.
What is the equation for the marginal revenue earned from selling an extra unit of v2 into the external market.?
A MR=50-0.0004X
B MR=50-0.0008X
C MR= 10-0.0004X
D MR= 10-0.0008X
Can you explain this question please?? Im not getting any of these answer.First you need to get the a and b for the price demand equation, and for this b = (32-30)/(50,000 – 45,000) = 0.0004.
a = 30 + (0.0004 x 50,000) = 50Using the formula for the marginal revenue given on the formula sheet,
MR = a – 2bQ = 50 – 0.0008QThis is all explained in my free lectures on pricing.
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