Question

Sue's surfboards is the sole renter of surfboards on big wave island. sue does not price discriminate. for sue's surfboards, the change in total revenue from each additional surfboard rented is her:___.

a) marginal revenue, which is less than the rental price of a surfboard.
b) marginal cost, which is constant regardless of how many surfboards are rented.
c) marginal cost, which is greater than the rental price of a surfboard.
d) marginal revenue, which is equal to the rental price of a surfboard.
e) marginal revenue, which is equal to average total cost in the long run.

Answer 1

Marginal revenue for Sue's Surfboards, the sole renter of surfboards on Big Wave Island, is equal to the rental price of a surfboard, as Sue does not price discriminate, making the correct choice option (d).

Step-by-step explanation:

For Sue's Surfboards, the change in total revenue from each additional surfboard rented is her marginal revenue, which in this case would be option (d) marginal revenue, which is equal to the rental price of a surfboard. This is because Sue does not price discriminate; therefore, each additional unit sold (surfboard rented out) generates additional revenue equal to the rental price of one surfboard. When a company does not price discriminate, the price remains constant for each unit sold, and hence, the marginal revenue for each extra unit is simply the price at which the unit is sold. It is important to note that marginal revenue does not necessarily equal marginal cost or average total cost, especially in the long run where an equilibrium is reached that may include zero economic profits due to competition, as is the case in oligopolies. However, for a monopolist like Sue's Surfboards with inelastic demand, marginal revenue staying equal to price is a reasonable assumption.