If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price:

A. all the previous units, which used to sell at a higher price, now sell for more.
B. the marginal revenue of selling a unit is more than the price of the unit.
C. because of higher output, the marginal revenue curve is above the demand curve.
D. marginal revenue is affected by adding one additional unit sold at the new price.

Question

14-04-2020
Business

contestada

If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price:

A. all the previous units, which used to sell at a higher price, now sell for more.
B. the marginal revenue of selling a unit is more than the price of the unit.
C. because of higher output, the marginal revenue curve is above the demand curve.
D. marginal revenue is affected by adding one additional unit sold at the new price.

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Parrain Parrain · Answer 1 · 2020-04-17T04:11:23+02:00

Answer: D. marginal revenue is affected by adding one additional unit sold at the new price.

Explanation:

Marginal Revenue is the amount that a firm gets for selling an additional unit of a good.

That means that if a monopolist increases their output by 1 unit and then sells that unit at a lower price, their Marginal Revenue increases by the sales amount of the 1 unit of the latest good that was just sold.

For example, they sell a good for $5 even though they had been selling at $6, Marginal Revenue would increase by $5.