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4 February, 16:30

Suppose a monopoly concrete contractor builds 20 driveways per month for $10,000 each. In order to increase sales to 21 driveways, the contractor must lower the price of driveways to $9,500. The marginal revenue of the 21st driveway is

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  1. 4 February, 16:37
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    Answer: Marginal revenue is - $500.

    Explanation: The marginal revenue is calculated as the change in total revenue subtracted by the change in quantity.

    Total revenue is calculated by multiplying the price by the quantity:

    At a quantity of 20 driveways, the total revenue is = 20 * $10,000 = $200,000

    At a quantity of 21 driveways, the total revenue is = 21 * $9,500 = $199,500

    Marginal revenue = $199,500 - $200,000

    = - $500
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