Compute the Marginal Revenue When the Price Elasticity of Demand

question 135

Multiple Choice

Compute the marginal revenue when the price elasticity of demand is -0.25.

• A)-3P, meaning marginal revenue is negative and 3 times less than price.
• B)3P, meaning marginal revenue is positive and 3 times greater than price.
• C)-0.33P, meaning that marginal revenue is negative and one-third of the price.
• D)-0.25P, meaning that marginal revenue is negative and one-fourth of the price.

---

Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overhead incurred to convert raw materials into finished products.

Weighted-Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all goods available for sale during the period.

Equivalent Units

A concept in cost accounting used to equate units partially completed at the end of a period to units of finished goods.

Materials Cost

The total expense incurred by a company to purchase raw materials used in the production of goods or services.