Asked by Shannon Williams on Jul 08, 2024
Verified
A firm can sell 14 units at $18,but to sell 15 units,the firm must cut the price to $17.The marginal revenue derived from selling the 15th unit is
A) -$18.
B) 0.
C) $3.
D) $17.
E) $18.
Marginal Revenue
The additional revenue that a company generates from selling one more unit of a good or service.
- Become familiar with the notion of marginal revenue for monopolies and its repercussion on decision-making regarding prices and outputs.
Verified Answer
CC
Camryn CalderJul 12, 2024
Final Answer :
C
Explanation :
Marginal revenue is the additional revenue that a firm earns by selling one more unit.
Here, the firm can sell 14 units at $18, so the total revenue at this price is:
14 x $18 = $252
To sell the 15th unit, the firm must lower its price to $17. This means that the revenue from selling the 15th unit is:
$17 x 1 = $17
The marginal revenue, therefore, is the difference between the revenue from selling the 15th unit and the revenue from selling the 14th unit.
Marginal Revenue = $17 - $18 = -$1
So, the answer is not listed. However, the closest answer is C, which is $3. This is incorrect, as the marginal revenue is negative, not positive. Therefore, the correct answer is not listed.
Here, the firm can sell 14 units at $18, so the total revenue at this price is:
14 x $18 = $252
To sell the 15th unit, the firm must lower its price to $17. This means that the revenue from selling the 15th unit is:
$17 x 1 = $17
The marginal revenue, therefore, is the difference between the revenue from selling the 15th unit and the revenue from selling the 14th unit.
Marginal Revenue = $17 - $18 = -$1
So, the answer is not listed. However, the closest answer is C, which is $3. This is incorrect, as the marginal revenue is negative, not positive. Therefore, the correct answer is not listed.
Learning Objectives
- Become familiar with the notion of marginal revenue for monopolies and its repercussion on decision-making regarding prices and outputs.
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