Suppose that a monopolist increases production from 10 units to 11 units.If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:
A) $1.
B) $9.
C) $19.
D) $29.

Question

Quizplus · Accepted Answer

Marginal revenue (MR) is the additional revenue that the firm receives from selling one more unit of a good. When the monopolist increases production from 10 units to 11 units, the price drops from $30 to $29. This means the firm gets $29 for the 11th unit. However, it also loses $1 on each of the first 10 units because their price drops from $30 to $29. Therefore, the total change in revenue from selling the 11th unit is $29 - (10 * $1) = $29 - $10 = $19.

Suppose That a Monopolist Increases Production from 10 Units to 11