Assume a non-price discriminating monopolist can sell 20 units of a good for 4.00 each and can sell 21 units of that good for $ 3.85 each.The marginal revenue of the 21st unit is
A) $85.00.
B) $0.85.
C) -$0.85.
D) -$85.00.

Question

Quizplus · Accepted Answer

Marginal revenue is the additional revenue generated by selling one more unit of the good. 
Since the monopolist can sell 20 units for $4.00 each, the total revenue from selling 20 units is:
Total revenue = 20 x $4.00 = $80.00
When the monopolist sells the 21st unit, the price decreases to $3.85. 
Therefore, if the monopolist sells 21 units, the total revenue will be:
Total revenue = 20 x $4.00 + 1 x $3.85 = $83.85
The marginal revenue of the 21st unit is the additional revenue generated by selling the 21st unit alone, which is:
Marginal revenue = Total revenue from selling 21 units - Total revenue from selling 20 units
Marginal revenue = $83.85 - $80.00 = $3.85
Therefore, the answer is B, which is $0.85.

Assume a Non-Price Discriminating Monopolist Can Sell 20 Units of a Good