The figures given below represent the revenue curves of a monopolist. Figure 24.2 TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
Refer to Figure 24.2.If the output at E is 600 units, then the output at B is _____ units.(We know that the slope of the marginal revenue curve is twice the slope of the average revenue curve. )
A)900 units.
B)200 units.
C)300 units.
D)1200 units.
E)800 units.

Question

The figures given below represent the revenue curves of a monopolist. Figure 24.2  TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
Refer to Figure 24.2.If the output at E is 600 units, then the output at B is _____ units.(We know that the slope of the marginal revenue curve is twice the slope of the average revenue curve. )
A)900 units. 
B)200 units. 
C)300 units. 
D)1200 units. 
E)800 units.

Quizplus · Accepted Answer

At point E, the marginal revenue curve intersects the X-axis. Therefore, at point B, the marginal revenue curve will also intersect the X-axis. This means that the monopolist will produce the quantity where marginal revenue is zero. From the graph, we can see that at point E, the total revenue curve has a slope of zero, which means that total revenue is maximized. Therefore, at point B, total revenue will also be maximized. This occurs at the quantity where the average revenue curve intersects the marginal cost curve. Since the slope of the marginal revenue curve is twice the slope of the average revenue curve, we can see from the graph that the quantity at point E is twice the quantity at point A (which is where the average revenue curve intersects the marginal cost curve). Therefore, the output at B is 300 units (which is half of 600 units).

The Figures Given Below Represent the Revenue Curves of a Monopolist