Suppose a monopoly firm produces scooters and can sell 15 scooters per month at a price of $900 per scooter. In order to increase sales by one scooter per month, the monopolist must lower the price of its scooter by $25 to $875 per scooter. The marginal revenue of the 16th scooter is $25. $500. O $14,000. $27,500.
Suppose a monopoly firm produces scooters and can sell 15 scooters per month at a price of $900 per scooter. In order to increase sales by one scooter per month, the monopolist must lower the price of its scooter by $25 to $875 per scooter. The marginal revenue of the 16th scooter is $25. $500. O $14,000. $27,500.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose a monopoly firm produces scooters and can sell 15
scooters per month at a price of $900 per scooter. In order
to increase sales by one scooter per month, the monopolist
must lower the price of its scooter by $25 to $875 per
scooter. The marginal revenue of the 16th scooter is
$25.
$500.
O $14,000.
$27,500.
Expert Solution
Step 1: Define monopoly model.
In a monopoly market structure,
There exists a single seller.
There exists high barriers to entry and exit.
The monopolist will produce where the marginal revenue is equal to the marginal cost.
The marginal cost is the cost of producing an additional unit of output.
The price is determined from the demand curve.
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