Question

A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the tenth unit of sales per week is:A. -$1,000.

B. $9,000.

C. $10,000.

D. $1,000.

Answer 1

The marginal revenue of the tenth garage is the difference in total revenue when selling 10 units versus 9 units. This comes out to be $1,000, making the correct answer D. $1,000.

Step-by-step explanation:

The marginal revenue of the tenth unit is the additional revenue the firm would earn by selling the tenth unit. This is calculated as the difference in total revenue from selling 10 units instead of 9. Selling 10 units at $10,000 each gives a total revenue of $100,000, whereas selling 9 units at $11,000 each gives a total revenue of $99,000. Therefore, the marginal revenue of the tenth unit is:

Total Revenue at 10 units - Total Revenue at 9 units
$100,000 - $99,000 = $1,000

Hence, the correct answer is D. $1,000.

Answer 2

option (D) $1,000

Step-by-step explanation:

Data provided in the question:

Sales when 10 prefabricated garages per week are sold = $10,000 each

Sales when 9 prefabricated garages per week are sold = $11,000 each

Now,

Marginal revenue is given as Change in revenue with 1 unit change in production

Thus,

Marginal revenue = ( $10,000 × 10 ) - ( $11,000 × 9 )

= $100,000 - $99,000

= $1,000

Hence,

The answer is option (D) $1,000