In a successive monopoly structure, if distributor has a constant marginal cost of $5 and is paying the producer $12 per unit, which is the profit- maximizing wholesale price, what is the distributor's marginal revenue at this output level?
A)$7
B)$5
C)$12
D)$17

Question

Quizplus · Accepted Answer

The distributor's marginal revenue at this output level is $17. This is because the distributor pays the producer $12 per unit and has a constant marginal cost of $5. Therefore, for each unit sold, the distributor incurs a total cost of $12 (payment to producer) + $5 (marginal cost) = $17. Since marginal revenue equals the additional revenue from selling one more unit, and assuming the distributor sells the unit at the profit-maximizing wholesale price without any markup or discount, the marginal revenue would also be $17.

In a Successive Monopoly Structure, If Distributor Has a Constant