Questions: Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of 3,000 per week. The plant foreman observes, "Although the last 500 cigars we produced and sold increased our revenue by 7,500 and our costs by 7,000, we are only making an overall profit of 3,000 per week so I think we need to cut back on production. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 500 cigars? A. sales revenue B. gross profit C. gross earnings D. marginal revenue

Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of 3,000 per week. The plant foreman observes, "Although the last 500 cigars we produced and sold increased our revenue by 7,500 and our costs by 7,000, we are only making an overall profit of 3,000 per week so I think we need to cut back on production.

Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 500 cigars?
A. sales revenue
B. gross profit
C. gross earnings
D. marginal revenue

Transcript text: Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of $\$ 3,000$ per week. The plant foreman observes, "Although the last 500 cigars we produced and sold increased our revenue by $\$ 7,500$ and our costs by $\$ 7,000$, we are only making an overall profit of $\$ 3,000$ per week so I think we need to cut back on production. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 500 cigars? A. sales revenue B. gross profit C. gross earnings D. marginal revenue

Solution

The answer is D: marginal revenue.

Explanation for each option:

A. Sales revenue - This term refers to the total amount of money generated from the sale of goods or services. It is not specific to the additional revenue generated from selling an additional unit or batch of units.

B. Gross profit - This is the difference between sales revenue and the cost of goods sold. It does not specifically refer to the additional revenue from selling extra units.

C. Gross earnings - This term is often used interchangeably with gross profit, referring to the total revenue minus the cost of goods sold. It does not specifically denote the additional revenue from selling extra units.

D. Marginal revenue - This is the correct term for the additional revenue generated from selling one more unit or a specific number of additional units. In this case, the incremental revenue from selling the last 500 cigars is referred to as marginal revenue.

In summary, the incremental revenue received from the sale of the last 500 cigars is known as marginal revenue.

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