The diagram below shows the demand curve facing a single-price monopolist. FIGURE 10-4
-Refer to Figure 10-4.Suppose the firm is currently producing at point A on the demand curve,selling 100 units of output at a price of $60 per unit.If the firm moves to point B,the revenue the firm gives up on the units it was already selling is ________,and the revenue it gains on the additional units sold is ________.

Question

The diagram below shows the demand curve facing a single-price monopolist.  FIGURE 10-4
-Refer to Figure 10-4.Suppose the firm is currently producing at point A on the demand curve,selling 100 units of output at a price of $60 per unit.If the firm moves to point B,the revenue the firm gives up on the units it was already selling is ________,and the revenue it gains on the additional units sold is ________.

Quizplus · Accepted Answer

Moving from point A to point B on the demand curve means the firm is increasing its output from 100 units to 120 units. At point A, the price of each unit is $60. At point B, the price of each unit is $50. 
Therefore, the revenue the firm gives up on the units it was already selling is:
$60 x 100 units - $50 x 100 units = $1000
The revenue the firm gains on the additional units sold is:
$50 x 20 units = $1000
So, the net gain in revenue from moving from point A to point B is:
$1000 (additional revenue) - $1000 (revenue given up on existing units) = $0. Therefore, the firm has no financial incentive to move from point A to point B.

The Diagram Below Shows the Demand Curve Facing a Single-Price