A natural gas monopoly currently sells 100 gigajoules of natural gas at $11.00 per gigajoule. To sell one more gigajoule, the natural gas company must lower the price of natural gas to $10.90. Which of the following best describes the marginal revenue of the 101st gigajoule of natural gas?

Question

Quizplus · Accepted Answer

To sell the 101st gigajoule, the price must be lowered to $10.90 for all units, not just the 101st. Thus, the revenue from the first 100 units decreases by $0.10 each ($1 total), and the 101st gigajoule generates $10.90. The marginal revenue is $10.90 - $1 = $9.90, which is less than $10.90.

A Natural Gas Monopoly Currently Sells 100 Gigajoules of Natural