Use the following to answer question:
-(Table: Prices and Demand)The New Orleans Saints have a monopoly on Saints logo hats.The marginal cost of producing a hat is $18.If the Saints increase the number of hats they sell from 4 to 5,the price effect is a(n)_____ in total revenue of _____.
A)decrease;$20
B)increase;$20
C)decrease;$8
D)increase;$8

Question

Use the following to answer question: 
-(Table: Prices and Demand)The New Orleans Saints have a monopoly on Saints logo hats.The marginal cost of producing a hat is $18.If the Saints increase the number of hats they sell from 4 to 5,the price effect is a(n)_____ in total revenue of _____.
A)decrease;$20 
B)increase;$20 
C)decrease;$8 
D)increase;$8

Quizplus · Accepted Answer

Since the New Orleans Saints have a monopoly on Saints logo hats, they have the ability to control the price. When they increase the number of hats they sell from 4 to 5, the price effect is a decrease in total revenue. This means that the demand for the hats is not very elastic. The change in quantity demanded did not offset the change in price, resulting in a decrease in total revenue. The decrease in revenue is equal to the difference between the revenue from selling 4 hats and the revenue from selling 5 hats, which is $8.

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