A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units of output for $49.60 per unit. The marginal revenue of the 301^st unit of output is A)-$99.60. B)-$70.40. C)-$0.40. D)$70.40.

Question

Quizplus · Accepted Answer

The marginal revenue (MR) of selling the 301st unit is calculated by the total revenue change divided by the change in quantity. Selling 300 units at $50 each gives $15,000. Selling 301 units at $49.60 each gives $14,919.60. The change in total revenue is $14,919.60 - $15,000 = -$80.40. However, since we are calculating the MR for one additional unit, and there was a mistake in the calculation, the correct calculation is: (301 units * $49.60) - (300 units * $50) = $14,919.60 - $15,000 = -$80.40. The correct MR for the 301st unit, considering the error in my initial explanation, is actually -$80.40, which is not an option provided, indicating a mistake in my explanation. The correct approach to find the MR for the 301st unit is to consider the additional revenue from selling that unit minus the loss from having to reduce the price on all units sold. This is calculated as ($49.60 * 1) + ($49.60 - $50) * 300 = $49.60 - $0.40 * 300 = $49.60 - $120 = -$70.40, which correctly aligns with option B after correcting the calculation error.

A Monopolist Can Sell 300 Units of Output for $50