Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. Hi Phi Unlimited's total revenue from installing 15 sound systems is $30,000 and its total revenue from installing 18 sound systems is $33,000. The marginal revenue received from selling the 18th sound system is
A) equal to the price of the 16th sound system.
B) greater than the price of the 16th sound system.
C) less than the price of the 16th sound system.
D) Indeterminate from the given information.

Question

Quizplus · Accepted Answer

Marginal revenue is the additional revenue from selling one more unit. The increase in total revenue from selling 3 more systems (from 15 to 18) is $3,000, so the average additional revenue per system in this range is $1,000. Since the price must decrease to sell more in a monopolistic market, the marginal revenue of the 18th system is less than the price of the 16th system, assuming the price of each system sold decreases to sell more units.

Hi Phi Sound Unlimited Has a Monopoly Over the Installation