Suppose the accompanying table describes the demand for a good produced by monopolist. $$\begin{array} { | c | c | }
\hline \text { Price } & \text { Quantity } \
\hline \$ 10 & 1 \
\hline \$ 9 & 2 \
\hline \$ 8 & 3 \
\hline \$ 7 & 4 \
\hline \$ 6 & 5 \
\hline \$ 5 & 6 \
\hline \$ 4 & 7 \
\hline
\end{array}$$ The monopolist's marginal revenue from selling the 4th unit of output is less than $7 because:
A)marginal cost is greater than $3.
B)the consumer only pays $4 for the 4?? unit.
C)it has to charge $1 less for each of the first 3 units of output.
D)demand is perfectly elastic.

Question

Suppose the accompanying table describes the demand for a good produced by monopolist. $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity } \
\hline \$ 10 & 1 \
\hline \$ 9 & 2 \
\hline \$ 8 & 3 \
\hline \$ 7 & 4 \
\hline \$ 6 & 5 \
\hline \$ 5 & 6 \
\hline \$ 4 & 7 \
\hline
\end{array}$$ The monopolist's marginal revenue from selling the 4th unit of output is less than $7 because:
A)marginal cost is greater than $3.
B)the consumer only pays $4 for the 4?? unit.
C)it has to charge $1 less for each of the first 3 units of output.
D)demand is perfectly elastic.

Quizplus · Accepted Answer

Marginal revenue for the 4th unit is less than $7 because, to sell the 4th unit at $7, the monopolist must reduce the price from $8 to $7 for all previous units sold, thus losing $1 each on the first 3 units, which reduces the additional revenue gained from selling the 4th unit.

Suppose the Accompanying Table Describes the Demand for a Good