Currently,a monopolist's MR = $5 and its MC = $10 and it serves 10 consumers.An 11^th consumer walks in.Should the company provide service to the additional customer? A)Yes,MC is equal to the number of customers,so it should provide service to the additional customer. B)Yes,MR

Question

Currently,a monopolist's MR = $5 and its MC = $10 and it serves 10 consumers.An 11^th consumer walks in.Should the company provide service to the additional customer? A)Yes,MC is equal to the number of customers,so it should provide service to the additional customer. B)Yes,MR < MC,so it should provide service to the additional customer. C)No,MR is less than the number of customers,so it should not provide service to the additional customer. D)No,MR < MC,so it should not provide service to the additional customer.

Quizplus · Accepted Answer

The additional customer will generate revenue of $5 for the monopolist, not covering the cost of serving them which is $10. Since MR < MC, serving the additional customer will decrease the total profit of the monopolist. Therefore, it is not rational for the company to provide the service to the 11th customer.

Currently,a Monopolist's MR = $5 and Its MC = $10