If a monopolist sells one more unit of output: (a) marginal revenue rises because of the...

Question:

If a monopolist sells one more unit of output:

(a) marginal revenue rises because of the quantity effect.

(b) marginal revenue rises because of the price effect.

(c) the price will be below marginal revenue due to the quantity effect.

(d) marginal revenue rises because the price of the extra goods sold falls.

Marginal revenue:

The goods are sold at the price set by the monopolist, gives him the total revenue. Now, if the monopolist is willing to sell one more unit of a good, his total revenue will rise and so will the marginal revenue. Thus, marginal revenue is the change in the total revenue due to the change in quantity sold.

Answer and Explanation: 1

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Option d, marginal revenue rises because the price of the extra goods sold falls is the correct answer choice.

When the monopolist wants to sell one...

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Marginal Revenue: Definition & Equation

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Chapter 2 / Lesson 13
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Learn about marginal revenue and understand how to use the marginal revenue formula. See how to calculate marginal revenue and the impact of price and marginal cost.


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