Suppose a monopoly firm produces software and can sell 10 items per month at a price of $50 each.In order to increase sales by one item per month,the monopolist must lower the price of its software by $1 to $49.The marginal revenue of the 11^th item is: A) $1. B) $39. C) $49. D) $50.

Question

Quizplus · Accepted Answer

The marginal revenue is the additional revenue obtained from selling one more unit of the product. 
In this case, the monopoly firm can sell 10 units at a price of $50 each, which generates a total revenue of $500. 
To sell an additional unit, the firm must lower the price to $49. This means that the revenue generated by the 11th unit is not $50, but rather $49. 
Therefore, the marginal revenue of the 11th unit is $49 - $50 = -$1. 
Since the price decreases by $1 and the quantity sold increases by 1 unit, the demand for the product is elastic. 
The best choice is B because it correctly represents the marginal revenue of the 11th unit sold.

Suppose a Monopoly Firm Produces Software and Can Sell 10