Asked by Aydee Esparza on Jun 01, 2024
Verified
(Table: Prices and Demand) The New Orleans Saints have a monopoly on Saints logo hats.The marginal cost of producing a hat is $18.If the Saints increase the number of hats they sell from 4 to 5,the price effect is a(n) _____ in total revenue of _____.
A) decrease;$20
B) increase;$20
C) decrease;$8
D) increase;$8
Price Effect
The impact on consumer demand and market supply when the price of a good or service changes.
Total Revenue
The total amount of money generated by a firm from the sale of its goods or services.
Hats
headwear designed for various purposes, including protection against environmental conditions, religious significance, or as a fashion accessory.
- Recognize and measure the marginal cost, marginal revenue, quantity effect, and price effect in monopoly scenarios.
Verified Answer
FT
Filiana TanotoJun 02, 2024
Final Answer :
C
Explanation :
Since the New Orleans Saints have a monopoly on Saints logo hats, they have the ability to control the price. When they increase the number of hats they sell from 4 to 5, the price effect is a decrease in total revenue. This means that the demand for the hats is not very elastic. The change in quantity demanded did not offset the change in price, resulting in a decrease in total revenue. The decrease in revenue is equal to the difference between the revenue from selling 4 hats and the revenue from selling 5 hats, which is $8.
Learning Objectives
- Recognize and measure the marginal cost, marginal revenue, quantity effect, and price effect in monopoly scenarios.
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