Table 15-3
Consider the following demand and cost information for a monopoly.
-Refer to Table 15-3. The marginal revenue of the 2nd unit is
A)$10.
B)$15.
C)$20.
D)$25.

Question

Table 15-3
Consider the following demand and cost information for a monopoly. 
-Refer to Table 15-3. The marginal revenue of the 2nd unit is
A)$10. 
B)$15. 
C)$20. 
D)$25.

Quizplus · Accepted Answer

To find the marginal revenue of the 2nd unit, we need to calculate the change in total revenue when selling the 2nd unit. From the table we can see that selling the 1st unit at $50 results in a total revenue of $50. Selling the 2nd unit at $45 results in a total revenue of $90. Therefore, the change in total revenue when selling the 2nd unit is $40 ($90 - $50).

The marginal revenue of the 2nd unit is the change in total revenue divided by the change in quantity, which is $40/2= $20. Therefore, the answer is B.

As for the best choice, more information is needed such as the level of output and the marginal cost. Without this information, we cannot determine the best choice for the monopoly.

Table 15-3 Consider the Following Demand and Cost Information for a Monopoly