A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sales quantity increases by
A)4 units per day.
B)3 units per day.
C)2 units per day.
D)1 unit per day.

Question

Quizplus · Accepted Answer

When the price is lowered from $15 to $14, the total revenue increases by $22. Initially, the revenue is 6 units * $15 = $90. After the price decrease, the revenue becomes $90 + $22 = $112. At the new price of $14, to have a revenue of $112, the quantity sold must be $112 / $14 = 8 units. Therefore, the sales quantity increases by 8 units - 6 units = 2 units per day.

A Monopolist Sells 6 Units of a Product Per Day