A single-price monopoly can sell 10 units of its product at a price of $45 each, but to sell 11 units the monopoly must cut the price to $44. What is the marginal revenue of the extra unit sold?
A) $484
B) $44
C) $34
D) $450
E) -$1

Question

Quizplus · Accepted Answer

The marginal revenue of an extra unit sold is the change in total revenue when one additional unit is sold. In this case, the monopoly is only able to sell an extra unit by reducing the price from $45 to $44.

So the marginal revenue of the extra unit sold is:

Marginal Revenue = Change in Total Revenue / Change in Quantity

Marginal Revenue = ($44 x 11) - ($45 x 10) / (11 - 10)

Marginal Revenue = $484 - $450 = $34

Therefore, the best choice is C.

A Single-Price Monopoly Can Sell 10 Units of Its Product