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Question
Macroeconomics
Posted 3 months ago

The price and total revenue for the monopoly firm Mammoth, Inc. based on the quantity it sells is shown in this table:
\begin{tabular}{lll} 
Q & Price & Total revenue \\
\hline 0 & $20\$ 20 & $0\$ 0 \\
1 & $18\$ 18 & $18\$ 18 \\
2 & $16\$ 16 & $32\$ 32 \\
3 & $14\$ 14 & $42\$ 42 \\
4 & $12\$ 12 & $48\$ 48 \\
5 & $10\$ 10 & $50\$ 50 \\
6 & $8\$ 8 & $48\$ 48
\end{tabular}

What is the marginal revenue (MR) for the third unit and the fourth unit?
Choose 1 answer:
(A) MR(3)=$10;MR(4)=$6M R(3)=\$ 10 ; M R(4)=\$ 6
(B) MR(3)=$10;MR(4)=$10M R(3)=\$ 10 ; M R(4)=\$ 10
(C) MR(3)=$6;MR(4)=$6M R(3)=\$ 6 ; M R(4)=\$ 6
(D) MR(3)=$2;MR(4)=$2M R(3)=-\$ 2 ; M R(4)=-\$ 2
(巨) MR(3)=$14;MR(4)=$12M R(3)=\$ 14 ; M R(4)=\$ 12
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Answer from Sia
Posted 3 months ago
Solution
a
Calculation of Marginal Revenue for the Third Unit: Marginal revenue (MR) is the change in total revenue (TR) from selling one more unit. To find MR(3)MR(3), we calculate the difference in total revenue when the quantity increases from 2 to 3
b
Mathematical Expression for MR(3)MR(3): MR(3)=TR(3)TR(2)=$42$32=$10MR(3) = TR(3) - TR(2) = \$42 - \$32 = \$10
c
Calculation of Marginal Revenue for the Fourth Unit: Similarly, to find MR(4)MR(4), we calculate the difference in total revenue when the quantity increases from 3 to 4
d
Mathematical Expression for MR(4)MR(4): MR(4)=TR(4)TR(3)=$48$42=$6MR(4) = TR(4) - TR(3) = \$48 - \$42 = \$6
Answer
(A) MR(3)=$10;MR(4)=$6MR(3)=\$10 ; MR(4)=\$6
Key Concept
Marginal Revenue in Monopoly
Explanation
Marginal revenue is the additional revenue gained from selling one more unit of a good or service. In a monopoly, the marginal revenue is not equal to the price of the good because the monopoly must lower the price to sell additional units.

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