Which of the following formulas is correct?

Question

Marginal revenue = Δ TR + Δ Q

Marginal cost = Δ TC / Δ Q

Average revenue = Total revenue – Quantity sold

Marginal cost = Δ TC – Δ Q

Answer 1

Let's evaluate each of the formulas you provided:

1. Marginal Revenue = Δ TR + Δ Q
   This formula is incorrect. The correct formula for marginal revenue (MR) is:
   \[ \text{Marginal Revenue} = \frac{\Delta TR}{\Delta Q} \]
   (Where Δ TR is the change in total revenue and Δ Q is the change in quantity sold).

2. Marginal Cost = Δ TC / Δ Q
   This formula is correct. Marginal cost (MC) is defined as the change in total cost (Δ TC) divided by the change in quantity (Δ Q):
   \[ \text{Marginal Cost} = \frac{\Delta TC}{\Delta Q} \]

3. Average Revenue = Total Revenue – Quantity sold
   This formula is incorrect. Average revenue (AR) is calculated as total revenue divided by the quantity sold:
   \[ \text{Average Revenue} = \frac{Total Revenue}{Quantity Sold} \]

4. Marginal Cost = Δ TC – Δ Q
   This formula is incorrect. As previously mentioned, marginal cost is not calculated this way. The correct expression is the change in total cost divided by the change in quantity.

In summary, the only correct formula from the options provided is:
Marginal Cost = Δ TC / Δ Q.