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A perfectly competitive firm produces digital devices using capital and labour. The wage rate is $16, the rental cost of capital is $16, and the

A perfectly competitive firm produces digital devices using capital and labour. The wage rate is $16, the rental cost of capital is $16, and the price of a digital device is $20. Suppose that the cost-minimising way to produce 10 digital devices is to use 2 units of labour and 2 units of capital, and the cost-minimising way to produce 11 digital devices is to use 2.2 units of labour and 2.2 units of capital. The marginal revenue (MR) of producing the 11th digital device is:

$7.5

$13

$20

$16

Which one is it, and why?

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