In order to sell more units, a monopolist must lower its prices. As shown in the
ID: 2785887 • Letter: I
Question
In order to sell more units, a monopolist must lower its prices. As shown in the table below, total revenue will initially ____________ and then ______________.
increase, continue to increase
decrease, continue to decrease
increase, decrease
decrease, increase
a.increase, continue to increase
b.decrease, continue to decrease
c.increase, decrease
d.decrease, increase
TABLE 10.2 Calculating the Monopolist's Marginal Revenue Total Quantity of customers Price of Marginal revenue per 1,000 customers (MR) A(TR) (TR) Formula: Q)X (P) $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 S0 $0.00 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 90,000 160,000 210,000 70,000 50,000 30,000 10,000 -10,000 250,000 240,000 210,000 160,000 90,000 0.00 -70,000Explanation / Answer
The correct answer is c. increase, decrease
Note : It can be seen that initially as the number of customers rise anf the price is decreased the revenue is increasing gradually. However, once the number of customers reach 6,000 the revenue starts declining.