Suppose that a monopolist increases production from 10 units to 11 units.If the market price declines from $20 per unit to $19 per unit, marginal revenue for the eleventh unit is:
A) $1.
B) $9.
C) $19.
D) $20.

Question

Quizplus · Accepted Answer

To calculate the marginal revenue, we need to find the change in total revenue due to the increase in production of one extra unit:
Marginal revenue = (New total revenue – Old total revenue) / (New quantity – Old quantity)

Let's calculate the old and new total revenues:
Old total revenue = 10 units x $20 per unit = $200
New total revenue = 11 units x $19 per unit = $209

Now, let's calculate the marginal revenue:
Marginal revenue = ($209 – $200) / (11 – 10) = $9

Therefore, the marginal revenue for the eleventh unit is $9.

Suppose That a Monopolist Increases Production from 10 Units to 11