A monopolist can sell 200 units of output for $36 per unit.Alternatively,it can sell 201 units of output for $35.80 per unit.The marginal revenue of the 201ˢᵗ unit of output is
A) $-4.20.
B) $-0.20.
C) $4.20.
D) $35.80.

Question

Quizplus · Accepted Answer

The marginal revenue is the change in total revenue from selling one more unit. Selling 200 units at $36 gives $7200, and selling 201 units at $35.80 gives $7200.80. The marginal revenue is $7200.80 - $7200 = $0.80. However, the price drop from $36 to $35.80 for all units means a loss of $0.20 per unit for the first 200 units, totaling $4.20. Thus, the marginal revenue is $0.80 - $4.20 = $-4.20.

A Monopolist Can Sell 200 Units of Output for $36