You must produce 200 records this week.Using the Lagrangian technique,you determine the profit-maximizing combination of pink vinyl and blue vinyl records and find that the Lagrangian multiplier is $2.50.From this you conclude that:
A) the marginal revenue is about $2.50.
B) the average revenue is about $2.50.
C) the average revenue exceeds average cost by about $2.50.
D) the marginal revenue exceeds marginal cost by about $2.50.
E) consumers prefer pink vinyl to blue vinyl.

Question

Quizplus · Accepted Answer

The Lagrangian multiplier represents the marginal profit of producing one more unit of either pink or blue vinyl records. Therefore, since the Lagrangian multiplier is $2.50, we can conclude that the marginal profit of producing one more unit of either pink or blue vinyl records is $2.50. Marginal revenue is equal to marginal profit in a competitive market, so we can say that the marginal revenue is about $2.50. Hence, the correct option is D.

You Must Produce 200 Records This Week