ACCA PM · Chapter 7 · Question 2 of 10
Phi Co currently sells 2,000 units of a product per month at $100 each. Market research shows that for every $5 increase in price, demand falls by 100 units (and vice versa). The variable cost is $40 per unit and fixed costs are unaffected by volume. Which equation gives marginal revenue (MR)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) MR = 200 - 0.1Q
Explanation
If P = a - bQ, then MR = a - 2bQ. Here P = 200 - 0.05Q, so MR = 200 - 0.1Q. The MR line has the same intercept as the demand curve but twice the slope.
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