Question

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

Answer 1

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

Answer 2

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