The following table shows the quantities of a good sold by a monopolist at different prices.

-Refer to the table above.Which of the following statements is true of the monopolist's total revenue?
A) As the monopolist reduces the price of its product from $9 to $3, its total revenue decreases.
B) As the monopolist reduces the price of its product from $9 to $3, its total revenue increases.
C) As the monopolist reduces the price of its product from $9 to $3, its total revenue increases and then decreases.
D) As the monopolist reduces the price of its product from $9 to $3, its total revenue decreases and then increases.

Question

The following table shows the quantities of a good sold by a monopolist at different prices.
 
-Refer to the table above.Which of the following statements is true of the monopolist's total revenue?
A) As the monopolist reduces the price of its product from $9 to $3, its total revenue decreases. 
B) As the monopolist reduces the price of its product from $9 to $3, its total revenue increases. 
C) As the monopolist reduces the price of its product from $9 to $3, its total revenue increases and then decreases. 
D) As the monopolist reduces the price of its product from $9 to $3, its total revenue decreases and then increases.

Quizplus · Accepted Answer

As the monopolist reduces the price from $9 to $8, the quantity sold increases from 0 to 3, resulting in an increase in total revenue from 0 to $24. As the price is further reduced from $8 to $6, quantity sold increases from 3 to 5, resulting in an increase in total revenue from $24 to $30. However, as the price is further reduced from $6 to $4, the quantity sold increases from 5 to 6, but total revenue decreases from $30 to $24. Finally, as the price is reduced from $4 to $3, the quantity sold increases from 6 to 7, but total revenue decreases from $24 to $21. Therefore, as the monopolist reduces the price of its product from $9 to $3, its total revenue increases and then decreases.

The Following Table Shows the Quantities of a Good Sold