Question

A monopolistic firm has a sales schedule such that it can sell 11 prefabricated garages per week at $1,000 each, but if it restricts its output to 10 per week it can sell these at $1,200 each. The marginal revenue of the 11th unit of sales per week is

Answer 1

The marginal revenue of the 11th unit of sales per week for a monopolistic firm can be calculated by comparing the revenue earned from selling 10 units to the revenue earned from selling 11 units. In this case, the marginal revenue is -$1,000, indicating a reduction in total revenue.

Step-by-step explanation:

The marginal revenue of a firm is the additional revenue generated from selling one more unit of output. In a monopolistic market, the firm has some control over its output and pricing. To determine the marginal revenue of the 11th unit of sales per week, we need to compare the revenue earned from selling 10 units to the revenue earned from selling 11 units.

At 10 units, the firm can sell each garage for $1,200. So the total revenue from selling 10 units is 10 * $1,200 = $12,000.

At 11 units, the firm can only sell each garage for $1,000. So the total revenue from selling 11 units is 11 * $1,000 = $11,000.

The marginal revenue of the 11th unit of sales is the difference between the total revenue of selling 11 units and the total revenue of selling 10 units. So the marginal revenue is $11,000 - $12,000 = -$1,000.

The negative marginal revenue indicates that selling the 11th unit of sales reduces the firm's total revenue.