Arturo runs a Taco Bell franchise. He is selling 250 Gordita Supremes per week at a price of $2.75. If he lowers the price to $2.70, he will sell 251 Gordita Supremes
What is the marginal revenue of the 251st Gordita Supreme? If selling the extra Gordita Supreme adds $0.20 to Arturo's costs, what will be the effect on his profit from selling 251 Gordita Supremes instead of 250?
The marginal revenue of the 251st Gordita Supreme is ($2.70 × 251 ) - ($2.75 × 250 ) = -$9.80. If selling the extra Gordita Supreme adds $0.20 to Arturo's costs, and selling 1 extra Gordita Supreme decreases his total revenue by $9.80, his profit will decrease by $9.80 + $0.20 = $10.00.
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