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Homework answers / question archive / Suppose that a monopolist can sell five units of output at a price of $5 or six units of output at a price of $4
Suppose that a monopolist can sell five units of output at a price of $5 or six units of output at a price of $4. What is the marginal revenue of the sixth unit?
Computation of Marginal Revenue of Sixth Unit:
At 5th unit , total revenue = $5 * 5 = $25
At 6th unit , total revenue = $4 * 6 = $24
The marginal revenue of the Sixth Unit = Change in Total Revenue / Change in Output
= ( $25 - $24) / ( 6 - 5 )
= $1 / 1
= $1
So, Marginal revenue of sixth unit is $1.
