Suppose you own the patent for a new type of bicycle light, hence giving you a monopoly over the industry. If you lower the price of the lights from $10 to $9, then we know for sure that at the new price: a) marginal cost is more than $9. b) marginal cost is less than $9. c) marginal revenue is less than $9. d) marginal revenue is more than $9. e) None of the above.

Question

Marlon Hall

Business

6 November, 16:12

Suppose you own the patent for a new type of bicycle light, hence giving you a monopoly over the industry. If you lower the price of the lights from $10 to $9, then we know for sure that at the new price: a) marginal cost is more than $9. b) marginal cost is less than $9. c) marginal revenue is less than $9. d) marginal revenue is more than $9. e) None of the above.

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Answers (1)

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Winnie · Answer 1

The correct option is C (marginal revenue is less than $9)

Explanation:

If the price of a commodity is lowered because you have some kind of monopoly over the industry, this shows that the marginal revenue is lower than the new selling price. This is simply because marginal revenue is that revenue gained when you produce one more unit of a product, and hence there is no way that this value would be greater than the new selling price. You would be selling at a loss if you do so.