Table 15-6
A monopolist faces the following demand curve:
-Refer to Table 15-6. What is the marginal revenue from the sale of the 3rd unit?

Question

Table 15-6
A monopolist faces the following demand curve: 
-Refer to Table 15-6. What is the marginal revenue from the sale of the 3rd unit?

Quizplus · Accepted Answer

Marginal revenue is calculated by finding the change in total revenue from selling one additional unit. In this case, the total revenue from selling 2 units is $26, and the total revenue from selling 3 units is $26.50. Therefore, the marginal revenue from selling the 3rd unit is $0.50. However, since the demand curve is downward-sloping, selling the 3rd unit will cause the monopolist to lower the price for all units. This means that the total revenue from selling the first two units will decrease, resulting in a negative marginal revenue for the 3rd unit. Therefore, the best choice is B (-$3).

Table 15-6 A Monopolist Faces the Following Demand Curve