Show Stoppers is a monopoly provider of ticket services for concerts and sporting events, and their current service charge is $10.00. In order to attract one more customer, they have to lower their service charge to $9.50. Show Stoppers' marginal revenue from this additional customer is:
A)equal to $9.50.
B)greater than $9.50.
C)less than $9.50.
D)between $10.00 and $9.50.
E)equal to $10.00

Question

Quizplus · Accepted Answer

Marginal revenue for a monopolist is less than the price of the additional unit sold because to sell the additional unit, the monopolist must lower the price on all units sold. In this case, lowering the service charge to $9.50 to attract one more customer means reducing the price not just for the additional customer but for all customers, thereby making the marginal revenue less than $9.50.

Show Stoppers Is a Monopoly Provider of Ticket Services for Concerts