Asked by Arber Gashi on May 11, 2024
Verified
Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit.The marginal revenue of the 21st unit of output is:
A) $9.75.
B) $204.75.
C) $4.75.
D) $.25.
Marginal Revenue
The increase in revenue that results from the sale of one additional unit of a product.
Output Unit
The quantity produced or service provided over a given period of time, often used to measure productivity.
Pure Monopolist
An exclusive provider of a particular good or service in the market, facing no competition.
- Gain insight into the difference between marginal revenue and price for a monopolist and its effect on profit maximization.
Verified Answer
BR
Brooke RewisMay 13, 2024
Final Answer :
C
Explanation :
The marginal revenue is the additional revenue generated from selling an additional unit of output.
In this case, selling the 21st unit generates a revenue of $9.75, which is $0.25 less than the revenue generated by selling the 20th unit at $10.
Therefore, the marginal revenue of the 21st unit is $9.75.
In this case, selling the 21st unit generates a revenue of $9.75, which is $0.25 less than the revenue generated by selling the 20th unit at $10.
Therefore, the marginal revenue of the 21st unit is $9.75.
Learning Objectives
- Gain insight into the difference between marginal revenue and price for a monopolist and its effect on profit maximization.
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