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 & $\$ 20$ & $\$ 0$ \\
1 & $\$ 18$ & $\$ 18$ \\
2 & $\$ 16$ & $\$ 32$ \\
3 & $\$ 14$ & $\$ 42$ \\
4 & $\$ 12$ & $\$ 48$ \\
5 & $\$ 10$ & $\$ 50$ \\
6 & $\$ 8$ & $\$ 48$
\end{tabular}
What is the marginal revenue (MR) for the third unit and the fourth unit?
Choose 1 answer:
(A) $M R(3)=\$ 10 ; M R(4)=\$ 6$
(B) $M R(3)=\$ 10 ; M R(4)=\$ 10$
(C) $M R(3)=\$ 6 ; M R(4)=\$ 6$
(D) $M R(3)=-\$ 2 ; M R(4)=-\$ 2$
(巨) $M R(3)=\$ 14 ; M R(4)=\$ 12$
```

Sign in to unlock the answer

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 $MR(3)$, we calculate the difference in total revenue when the quantity increases from 2 to 3

b

Mathematical Expression for $MR(3)$: $MR(3) = TR(3) - TR(2) = \$42 - \$32 = \$10$

c

Calculation of Marginal Revenue for the Fourth Unit: Similarly, to find $MR(4)$, we calculate the difference in total revenue when the quantity increases from 3 to 4

d

Mathematical Expression for $MR(4)$: $MR(4) = TR(4) - TR(3) = \$48 - \$42 = \$6$

Answer

(A) $MR(3)=\$10 ; MR(4)=\$6$

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.

Not the question you are looking for? Ask here!

Enter question by text

Enter question by image

Upgrade to Asksia Pro

Join a AskSia's Pro Plan, and get 24/7 AI tutoring for your reviews, assignments, quizzes and exam preps.

Unlimited chat query usages

Strong algorithms that better know you

Early access to new release features

Study Other Question