The graph shows the demand curve for pizza in a small isolated town hat has only

Question

The graph shows the demand curve for pizza in a small isolated town hat has only Price (dollars per pizza) Draw the corresponding marginal revenue curve. Make your curve ineersect both axes and label it. Choose the comect stabement O A. For a monopoly, total revenue equals marginal revenue multiplied by the quantty sold O B. Marginal revenue equalis total revenue divided by quantiy sold OC. For a monopoly, manginal revenue equals price O D. Whee price is lowered to sell one more unit, the lower price nesuts in revenue loss and the increased quaneny sold nesuilts in a revenue gain Quiy thousands of

Explanation / Answer

For a monopoly the marginal revenue will be less than the price of the product becuse if the monopoly wanted to increase the quantity sold the monopolist must reduce the price. But in a competitive market the price equals the marginal revenue this is because they are price takers and any firm in the market cannot influence the market price.

The total revenue divided by quantity sold is average revenue not marginal revenue, the marginal revenue is the addition made to total revenue by producing one more unit of the product. And it is calculated by change in total revenue divided by change in quantity sold.

Ans: D) When the price is lowered to sell one more unit, the lower price results in a revenue loss and increased quantity results in a revenue gain.

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