A monopolist can sell 7,000 units at a price of $5 per unit.Lowering price to all buyers by $1 raises the quantity demanded by 500 units.What is the change in total revenue resulting from this price change?

Question

Quizplus · Accepted Answer

Before the price change, the monopolist's total revenue was 7,000 x $5 = $35,000. 
After the price change, the new price is $4 and the quantity demanded is 7,500 units (an increase of 500 units). 
Therefore, the new total revenue is 7,500 x $4 = $30,000. 
The change in total revenue is $30,000 - $35,000 = -$5,000. This means that the monopolist experiences a decrease in total revenue as a result of the price change.

A Monopolist Can Sell 7,000 Units at a Price of $5