Mkt1 - Market Principles and Applications

Assessment Code: MKT1

Student Name: Catherine Everett

Student ID: 000276052

Date: March 13, 2013

Mentor Name: Janie Chromcak

Marginal revenue (MR) is the change in total revenue that is made when a firm sells one addittional unit of a product (MR=change in total revenue/change in total sales) Total revenue is the sum of total sales for the product at a specified quanity (McConnell, Brue and Flynn, 2012). The cost and price of a product might change depending on the number of units prodcued. At times, the price of the product would need to drop in order for the next produced unit to sell. This will result in a decrease in marginal revenue. Although the total revenue will increase, the revenue made off of the each additional unit will not be as high and will mean total revenue will climb at a slower pace.

Using the tables for Company A, it can be determined that the total revenue made from selling one widget is $150 and it is $290 for selleing two widgets. Using the formula marginal revenue ($290-$150/2-1), the margianl revenue would be $140. Three widgets generates a total revenue of $420 for a marginal revenue of $130; four widgets brings in a total revenue of $540 at a marginal revenue of $130. Selling 14 widgets brings in $1190 and selling 15 generates $1200 in total revenue. The difference between selling the two widgets is only $10. What this shows is that for each additional widget that is produced, the company's marginal cost for that item decreases by $10.

Marginal cost is the difference in total cost to produce each additional item and how it will affect total cost (Marginal Cost = change in total cost/change in quanity produced). Marginal cost is used to determine if it would be economically efficient for the company to produce an additional unit(McConnell, Brue and Flynn, 2012). As the price of things such as hiring more workers and the cost of additional macheinery needed to produce the...