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13 December, 22:23

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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  1. 14 December, 01:39
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    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
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