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

Economics Mar 19, 2021

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?

Expert Solution

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.

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