Columns 1 and 2 make up a portion of a monopolist's production function for a single variable input,labor.Columns 2 and 3 represent the demand function facing the monopolist over this range of output: $\begin{array}{c}
\begin{array}{c}
(1)\
\text {Units of Labor}\
3 \
4 \
5 \
6 \
7
\end{array}
\begin{array}{c}
(2)\
\text {Units of Output}\
370 \
490 \
570 \
600\
620
\end{array}
\begin{array}{c}
(3)\
\text {Price}\
\$10\
9\
8\
7\
6
\end{array}
\end{array}$
How much does the fifth unit of labor add to the firm's total revenue?

Question

Columns 1 and 2 make up a portion of a monopolist's production function for a single variable input,labor.Columns 2 and 3 represent the demand function facing the monopolist over this range of output: $\begin{array}{c}
\begin{array}{c}
(1)\
\text {Units of Labor}\
3 \
4 \
5 \
6 \
7
\end{array}
\begin{array}{c}
(2)\
\text {Units of Output}\
370 \
490 \
570 \
600\
620
\end{array}
\begin{array}{c}
(3)\
\text {Price}\
\$10\
9\
8\
7\
6
\end{array}
\end{array}$
 How much does the fifth unit of labor add to the firm's total revenue?

Quizplus · Accepted Answer

The fifth unit of labor increases output from 490 to 570 units. The price falls from $9 to $8. The marginal revenue is (570 units * $8) - (490 units * $9) = $4,560 - $4,410 = $150.

Columns 1 and 2 Make Up a Portion of a Monopolist's