Suppose that Louise is the only person licensed to rent out tandem bicycles on the boardwalk in her small hometown. When she increases her rentals from 15 tandem bicycles to 16 tandem bicycles, the market rental price declines from $35 per rental to $34 per rental. The marginal revenue of the 16th tandem bicycle is:

Question

Quizplus · Accepted Answer

The marginal revenue of the 16th tandem bicycle is calculated by considering both the price of the additional unit sold and the loss in revenue from all the previous units due to the price decrease. Initially, Louise sells 15 bicycles at $35 each, totaling $525. After increasing the rentals to 16 bicycles, the price drops to $34 each, making the total revenue $544 (16 bicycles * $34 each). The marginal revenue of the 16th bicycle is the change in total revenue, which is $544 - $525 = $19.

Suppose That Louise Is the Only Person Licensed to Rent