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Hello
I have a quick question.
I am just at the end of the “Optimal Pricing – tabular approach” section of the Pricing (Chapter 7).
I am a bit confused by the statement at the end of this section in the OpenTuition Notes:
“Whichever way you choose to calculate the optimum selling price in the above example, do be aware that it occurs at the point where marginal revenue = marginal cost.”
I have done some online research and it confirms this above statement.
In Example 2 in the Opentuition Pricing (Chapter 7) Notes, I worked out the answer that the optimal selling price is $15 per unit in order to maximise profit.
However, this optimal selling price figure of $15 per unit is when the Marginal revenue (calculated) is 1400 and the Marginal cost (calculated) is 1360. Therefore the Marginal Revenue in this instance does not exactly equal the Marginal Cost.
Please can you explain this to me? It would be much appreciated.
Thank you.
Best Regards
JK
I do hope that you are not using the notes without watching the lectures. We do make it clear that the notes are just lecture notes and that it is in the lectures that I work through all the examples and explain and expand on the notes.
If you are not watching the lectures for any reason then you need to buy a Study Text from one of the ACCA approved publishers and study from there.As far as your question about example 2 is concerned, again I do explain this in the free lectures but it is because the question only gives limited possible selling prices and therefore we have no choice but to choose whichever of them results in the highest profit. Were we to have the possibility of any selling price then the optimum selling price would not be exactly $15.
I do suggest that you watch the lectures. They are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
My apologies Mr Moffat. I will watch the full lectures.
Thank you for the explanation. Much appreciated.
JK
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