A Monopoly Sells 10 Units of Output at $10

question 187

Multiple Choice

A monopoly sells 10 units of output at $10. If the MR of the 11th unit is $4.50, then the price of the 11th unit is

• A) also $10.
• B) $9.50.
• C) greater than $10.
• D) $7.25.

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Definitions:

Skimming Pricing

A pricing strategy involving setting high prices initially and then gradually lowering them to make the product available to a broader market.

Penetration Pricing

A pricing strategy where the price of a new product is set lower than competitors to quickly gain market share.

Skimming Strategy

A pricing tactic that involves setting a high price for a new product to maximize profits from segments willing to pay more, before lowering the price over time.

Price Insensitivity

A condition where the demand for a product is unresponsive or less sensitive to changes in its price.