The Total Revenue earned by selling 20 units is ₹700. Marginal Revenue earned by selling 21st unit is ₹70. The

Question 28 of 37

Q. The Total Revenue earned by selling 20 units is ₹700. Marginal Revenue earned by selling 21st unit is ₹70. The value of Total Revenue earned by selling total 21 units will be ____________. (Choose the correct alternative)

(a) ₹721

(b) ₹630

(d) ₹720

Sikkim CbseCBSE Class XII Board 2019Subjective· 1mImportance★★★★★

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Concept understanding — Marginal Revenue Constant

Marginal Revenue Constant: When Every Extra Unit Earns the Same

Think about a lemonade stand. On a hot day, you sell the first glass for ₹20. The second glass? Still ₹20. The third? ₹20 again. Every time you sell one more glass, your total revenue goes up by exactly ₹20. That ₹20 is your marginal revenue — and it stays the same no matter how many glasses you sell.

That is the simplest case of constant marginal revenue. But in economics, this situation is special, not automatic. Let's see why.

The Precise Meaning

Marginal Revenue (MR) is the change in total revenue when you sell one additional unit of output.

MR = \frac{\Delta TR}{\Delta Q}

Where:

$\Delta TR$ = change in total revenue
$\Delta Q$ = change in quantity sold (usually 1 unit)

When MR is constant, it means every extra unit you sell adds exactly the same amount to your total revenue. The number does not change as you sell more.

When Does MR Stay Constant?

This happens only when the firm can sell any quantity at the same price — that is, when the firm is a price taker. In perfect competition, the market sets the price, and the individual firm cannot influence it. So:

MR = P

The marginal revenue from selling one more unit is simply the market price. And since the price does not change with the firm's output, MR is constant.

Important

In perfect competition, $MR = AR = P$ at every level of output. The MR curve is a horizontal straight line at the market price.

Why It Matters

Constant MR changes how a firm thinks about profit. If MR is constant, the firm's total revenue is a straight line:

TR = P \times Q

Every extra unit adds exactly $P$ to revenue. So the firm's decision to produce more depends entirely on whether the marginal cost of that unit is less than or greater than this constant MR.

Note

If MR is constant but MC is rising (as it usually does), the firm will keep producing until $MR = MC$ . That is the profit-maximising output.

The Contrast: When MR Is Not Constant

Most real-world firms face downward-sloping demand. To sell more, they must lower the price on all units. So the extra revenue from selling one more unit is less than the price — MR falls as output rises. That is the world of monopoly, monopolistic competition, and oligopoly. …

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Marginal Revenue is the extra revenue from selling one more unit. Adding the MR of the 21st unit to the TR of 20 units gives the new TR. The answer is ₹770.

The core idea here is simple: Marginal Revenue (MR) is defined as the change in Total Revenue (TR) when one additional unit is sold. So if you know the TR before selling that unit and you know the MR from selling it, you just add them to find the new TR.

Let’s walk through it.

Identify what’s given.

You are told:
- Total Revenue from 20 units: $TR_{20} = ₹700$
- Marginal Revenue from selling the 21st unit: $MR_{21} = ₹70$
Recall the definition of Marginal Revenue.

For a discrete change in quantity (like going from 20 to 21 units),

MR_n = TR_n - TR_{n-1}

Here, $MR_{21} = TR_{21} - TR_{20}$ .

Plug in the known values.

70 = TR_{21} - 700

Solve for $TR_{21}$ .

TR_{21} = 700 + 70 = 770

So the Total Revenue from selling 21 units is ₹770. …

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Q.The Total Revenue earned by selling 20 units is ₹700. Marginal Revenue earned by selling 21st unit is ₹70. The value of Total Revenue earned by selling total 21 units will be ____________. (Choose the correct alternative)

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