The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
-Refer to Figure 11.2. If the output at E is 600 units, then the output at B is _____ units. (We know that the slope of the marginal revenue curve is twice the slope of the average revenue curve.)
A)900 units.
B)200 units.
C)300 units.
D)1200 units.
E)800 units.

Question

The figures given below represent the revenue curves of a monopolist.Figure 11.2
  TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
-Refer to Figure 11.2. If the output at E is 600 units, then the output at B is _____ units. (We know that the slope of the marginal revenue curve is twice the slope of the average revenue curve.)
A)900 units. 
B)200 units. 
C)300 units. 
D)1200 units. 
E)800 units.

Quizplus · Accepted Answer

At point E, the marginal revenue curve intersects the x-axis and becomes negative indicating that the monopolist should not produce beyond this point. Therefore, the output at point B, where the marginal revenue curve intersects the average revenue curve, must be less than 600 units. Looking at the graph, we can see that point B lies halfway between points A and C – the points where the marginal revenue curve intersects the total revenue curve. Therefore, the output at point B must be (1/2)*(1200-0) = 600/2 = 300 units.

The Figures Given Below Represent the Revenue Curves of a Monopolist.Figure