Question

Suppose a monopoly firm produces a medical device and can sell 15 items per month at...

Suppose a monopoly firm produces a medical device and can sell 15 items per month at a price of $2,000 each. In order to increase sales by one item per month, the monopolist must lower the price of its medical device by $1,000 to $1,900. The marginal revenue of the 16th item is:

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Answer #1

Price on selling 15 units = $2,000/device

Price on selling 16 units = $1,900/device

Total Revenue from selling 15 units = (15)(2,000) = $30,000

Total Revenue from selling 16 units = (16)(1,900) = $30,400

The marginal revenue is the additional revenue received when an additional unit is sold. It is calculated as the change in total revenue. So, the marginal revenue of the 16th unit is $30,400 - $30,000 = $400.

So, the marginal revenue of the 16th unit is $400.

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