Suppose that a monopolist can sell five units of output at a price of $5 or six units of output at a price of $4. What is the marginal revenue of the sixth unit?
A) $24
B) $49
C) -$1
D) $4

Question

Quizplus · Accepted Answer

Marginal revenue is the additional revenue generated from selling one more unit of output. In this case, if the monopolist sells 5 units at $5 each, their total revenue is $25. If they sell 6 units at $4 each, their total revenue is $24. Therefore, the marginal revenue of the sixth unit is -$1 (the change in total revenue from selling the fifth unit to selling the sixth unit).

Suppose That a Monopolist Can Sell Five Units of Output