Question

Suppose a monopoly concrete contractor builds 20 driveways per month for $10,000 each. In order to increase sales to 21 driveways, the contractor must lower the price of driveways to $9,500. The marginal revenue of the 21st driveway is:_________.

a. $500.
b. $199,500.
c. -$500.
d. $9,500.

Answer 1

The marginal revenue of the 21st driveway is: -$500. The right answer is C.

Step-by-step explanation:

In order to calculate the the marginal revenue of the 21st driveway, we have to calculate first the total revenue from 20 driveways.

Total revenue from 20 driveways = 20×$10,000= $200,000

Next, we calculate the Revenue from 21 driveways = 21×$9,500 = $199,500

Therefore, The Marginal revenue from 21th driveways = =$199,500-$200,000 =-$500