If the monopolist can sell 10 units at a price of $7 and 11 units at a price of $6.50,the marginal revenue of the 11th unit is
A)-$1.50.
B)0.
C)$1.50.
D)$6.50.
E)$7.00.

Question

Quizplus · Accepted Answer

Marginal revenue is the change in total revenue that results from producing one additional unit of output. In this case, the monopolist can sell 10 units for $7 each, or a total revenue of $70. If they increase production to 11 units, they must lower the price to $6.50 in order to sell that additional unit. The total revenue from selling 11 units would be $71.50 ($63 from the first 10 units, plus $6.50 from the 11th unit, plus $2 from the price reduction on the first 10 units). 
Therefore, the marginal revenue of the 11th unit is $1.50 ($71.50 - $70).

If the Monopolist Can Sell 10 Units at a Price