Table 15-5
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher's is able to engage in perfect price discrimination.

-Refer to Table 15-5.What is the total revenue when 7 shirts are sold?

Question

Table 15-5
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher's is able to engage in perfect price discrimination.
 
-Refer to Table 15-5.What is the total revenue when 7 shirts are sold?

Quizplus · Accepted Answer

From the table, we can see that the marginal revenue (MR) is equal to the price for each additional shirt sold. In this case, since Dreher's is able to engage in perfect price discrimination, it will charge each customer the maximum amount they are willing to pay for each shirt. 
For the first shirt, the maximum amount the customer is willing to pay is $200, so that is the price. For the second shirt, the maximum amount the customer is willing to pay is $180, for the third shirt it is $160, and so on. This leads to a total revenue of:
$200 + $180 + $160 + $140 + $120 + $100 + $90 = $910
Therefore, the optimal choice is to sell 7 shirts, and the total revenue will be $910.

Table 15-5 Dreher's Designer Shirt Company, a Monopolist, Has the Following Cost