A monopolistic firm (price searcher)can sell 10 units for $120 each.If the marginal revenue from selling the 11th unit is $87,what is the unit price at which 11 units can be sold?

Question

Quizplus · Accepted Answer

In monopolistic competition, marginal revenue is less than price. So, the price of the eleventh unit will be less than $120. Let the price of the eleventh unit be 'x'. 
Total revenue from selling 10 units = 10 * 120 = $1200
Total revenue from selling 11 units = 10 * 120 + x = $1200 + x
Marginal revenue from selling the 11th unit = Total revenue from selling 11 units - Total revenue from selling 10 units = x - $120
Given, Marginal revenue from selling the 11th unit = $87
So, x - $120 = $87
x = $207
Therefore, the price of the eleventh unit will be $207/11 = $18.81 (approximately)
Therefore, the unit price at which 11 units can be sold is 120 + 18.81 = $118.81 ≈ $117. Hence, the correct answer is B.

A Monopolistic Firm (Price Searcher)can Sell 10 Units for $120