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Worked Examples · Example 3

Q.Total Revenue is given by TR=100Q−2Q2TR=100Q-2Q^{2}.

(a) Derive the Marginal Revenue function using the derivative.
(b) Find MR at Q=10, and verify your answer using the central-difference method [TR(11)−TR(9)]/2\left[TR(11)-TR(9)\right]/2.
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(a) Applying the power rule term by term to TR=100Q−2Q2TR=100Q-2Q^{2}:

  • Derivative of 100Q100Q (i.e. 100Q1100Q^{1}): 100×1×Q0=100100\times1\times Q^{0}=100.
  • Derivative of −2Q2-2Q^{2}: −2×2×Q1=−4Q-2\times2\times Q^{1}=-4Q.

MR=d(TR)dQ=100−4QMR=\dfrac{d(TR)}{dQ}=100-4Q

(b) At Q=10Q=10:

MR=100−4(10)=100−40=60MR=100-4(10)=100-40=60

Verification by the central-difference method: compute TR at Q=9Q=9 and Q=11Q=11 and take the average change:

TR(9)=100(9)−2(9)2=900−162=738TR(9)=100(9)-2(9)^{2}=900-162=738

TR(11)=100(11)−2(11)2=1100−242=858TR(11)=100(11)-2(11)^{2}=1100-242=858

TR(11)−TR(9)2=858−7382=1202=60\dfrac{TR(11)-TR(9)}{2}=\dfrac{858-738}{2}=\dfrac{120}{2}=60 …

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