Suppose that a pure monopolist can sell 15 units of output at $6 per unit and 16 units at $5.70 per unit. For the monopolist to profitably produce and sell the sixteenth unit of output, its marginal cost must be anywhere at or below
A)$6.
B)$5.70.
C)$1.80.
D)$1.20.

Question

Quizplus · Accepted Answer

The marginal revenue for the sixteenth unit is calculated as the change in total revenue from selling one more unit: (16 units * $5.70) - (15 units * $6) = $91.20 - $90 = $1.20. For the monopolist to profitably produce the sixteenth unit, the marginal cost must be at or below the marginal revenue of $1.20.

Suppose That a Pure Monopolist Can Sell 15 Units of Output