Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the 21st unit of output is
A)$9.75.
B)$204.75
C)$4.75.
D)$0.25.

Question

Quizplus · Accepted Answer

Marginal revenue (MR) is the additional revenue that one more unit of product will bring. It's calculated as the change in total revenue divided by the change in quantity sold. Here, selling the 21st unit increases total revenue from $200 (20 units * $10) to $204.75 (21 units * $9.75), a change of $4.75. Thus, the MR of the 21st unit is $4.75.

Suppose That a Pure Monopolist Can Sell 20 Units of Output