A firm in a perfectly competitive market earns a total revenue of Rs 240 by selling 30 units. If it sells 35 units, its marginal revenue from each of the extra units is:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs 8
Given:
TR = Rs 240
Output = 30 units
For a price-taking firm, MR = AR = price.
Price = AR = 240 / 30 = Rs 8
Each extra unit sells at Rs 8, so MR = Rs 8.
Option (2) Rs 40 — this is the extra revenue from all 5 units together, not from each unit.
Option (3) Rs 280 — this is the TR at 35 units.
NCERT (2026-27): “4.2 Revenue … The average revenue ( AR ) of a firm is defined as total revenue per unit of output. …” “4.2 Revenue … The marginal revenue (MR) of a firm is defined as the increase in total revenue for a unit increase in the firm’s output. … Thus, for the perfectly competitive firm, MR=AR=p In other words, for a price-taking firm, marginal revenue equals the market price. Setting the algebra aside, the intuition for this result is quite simple. When a firm increases its output by one unit, this extra unit is sold at the market price. Hence, the firm’s increase in total revenue from the one-unit output expansion – that is, MR – is precisely the market price.” |