A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the 10th unit of sales per week is
A) âˆ'$1,000.
B) $9,000.
C) $10,000.
D) $1,000.

Question

Quizplus · Accepted Answer

Marginal revenue refers to the change in total revenue resulting from the sale of an additional unit. In this case, if the firm sells 10 garages per week, the total revenue would be 10 x $10,000 = $100,000. However, if they sell only 9 garages per week, they can charge a higher price of $11,000 per garage, resulting in a total revenue of 9 x $11,000 = $99,000.

Thus, the firm's marginal revenue for the 10th unit of sales per week would be the difference between the total revenue at 10 units and the total revenue at 9 units, which is ($100,000 - $99,000) = $1,000.

Therefore, the correct answer is D) $1,000.

A Monopolistic Firm Has a Sales Schedule Such That It