The extra revenue collected by selling an extra unit of output is
A) equal to price for both perfect competitors and monopolists.
B) a concept useful only when studying monopoly.
C) less than price for both perfect competitors and monopolists.
D) calculated as total revenue divided by output.
E) equal to price for a perfect competitor but less than price for a monopolist.

Question

Quizplus · Accepted Answer

For a perfect competitor, the extra unit sold is sold at the market price, so the extra revenue collected is equal to the price. However, for a monopolist, the extra unit sold will cause a decrease in the market price, meaning the extra revenue collected will be less than the original price. Therefore, the correct answer is E.

The Extra Revenue Collected by Selling an Extra Unit of Output