A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is
A) -$120.00.
B) -$75.40.
C) -$0.40.
D) $75.40.

Question

Quizplus · Accepted Answer

The marginal revenue is the change in total revenue from selling one more unit. Selling 300 units at $45 each gives $13,500. Selling 301 units at $44.60 each gives $13,414.60. The change in revenue is $13,414.60 - $13,500 = -$85.40. However, the question asks for the marginal revenue of the 301st unit, which is the change in revenue from the 300th to the 301st unit, calculated as $44.60 - $45 = -$0.40. But since the total revenue decreases by $85.40, the marginal revenue is actually -$75.40.

A Monopolist Can Sell 300 Units of Output for $45