A monopolist sells 2,000 units for $20 each. The total cost of 2,000 units is $30,000. If the price falls to $19, the number of units sold increases to 2,100. The total cost of 2,100 units is $30,075. When the monopolist moves from a price of $20 to $19, the marginal revenue will:

Question

Damon Alvarado

Business

20 December, 23:51

A monopolist sells 2,000 units for $20 each. The total cost of 2,000 units is $30,000. If the price falls to $19, the number of units sold increases to 2,100. The total cost of 2,100 units is $30,075. When the monopolist moves from a price of $20 to $19, the marginal revenue will:

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Answers (1)

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Doyle · Answer 1

Decrease by $1

Explanation:

Given:

Old dа ta:

Q0 = 2,000 units

P0 = $20

Total revenue before change = 2,000 x $20 = $40,000

After change in Price.

Q1 = 2,100 units

P1 = $19

Total revenue After change = 2,100 x $19 = $39,900

Computation of Marginal Revenue:

Marginal Revenue = (P1 - P0) / (Q1 - Q0)

= ($39,900 - $40,000) / (2,100 - 2,000)

= - 100 / 100

= $ (-1)

Marginal revenue will decrease by $1