A pure monopolist is selling 6 units at a price of R12. If the marginal revenue of the seventh unit is R5, then:Multiple Choiceprice of the seventh unit is R10.price of the seventh unit is R11.price of the seventh unit is greater than R12.firm's demand curve is perfectly elastic.
Question
A pure monopolist is selling 6 units at a price of R12. If the marginal revenue of the seventh unit is R5, then:Multiple Choiceprice of the seventh unit is R10.price of the seventh unit is R11.price of the seventh unit is greater than R12.firm's demand curve is perfectly elastic.
Solution
The price of the seventh unit is greater than R12.
Here's why:
A monopolist's marginal revenue is always less than the price of its product. In this case, the marginal revenue of the seventh unit is R5, which is less than the price of the sixth unit (R12). Therefore, the price of the seventh unit must be greater than R12.
This is because a monopolist can only sell additional units by lowering the price of all units sold, which reduces the revenue from earlier units. This is why the marginal revenue (the revenue from selling one more unit) is less than the price.
So, if the marginal revenue of the seventh unit is R5, the price of that unit must be more than R12.
Similar Questions
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