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ICE Princess25 [194]
2 years ago
15

If a monopolist increases sales from 100 to 101 units of output by lowering its price from $4.00 to $3.99, its marginal revenue

for moving from 100 units to 101 units of output would be
Business
2 answers:
Goshia [24]2 years ago
8 0

Answer:

Marginal revenue is $2.99

Explanation:

A monopoly is defined as a situation where a single supplier determines the price and amount of a good that will be supplied.

Marginal revenue is defined as the additional revenue that is earned from increased unit of sale of a product.

The initial revenue earned is 100 units* $4= $400.

The present revenue is 101 units* $3.99= $402.99

Therefore the additional revenue is 402.99-400= $2.99

kramer2 years ago
3 0

Answer:

Marginal revenue is $2.99

Explanation:

Monopoly simply means the market structure which is featured by one seller, selling a unique product in the market.

A monopolist is a person, team, or company which has controlling power over all the market for a particular good or service.

Marginal Revenue is the additional revenue generated when product sales are increased by one unit.

Solution

Initial Revenue = $4 X 100 = $400

Total Revenue = $3.99 X 101 = $402.99

Therefore, change in Total Revenue = $402.99 - $400 = $2.99

Change in quantity = 101 - 100 = 1

Marginal Revenue = change in Total Revenue/change in Quantity = $2.99/1 = $2.99

Therefore, Marginal Revenue = $2.99

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Price elasticity of demand = percentage change in quantity demanded / percentage change in price  

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.  

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded

If demand is relatively inelastic and price increases, there would be little or no change in the quantity demanded and as a result, total revenue would increase

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In the long run, people have more time to search for suitable alternatives. Thus, demand tends to be more elastic in the long run

If the long run, price is increased, the total quantity demanded would fall and revenue would fall

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ICE Princess25 [194]

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