Suppose a Firm Has a Monopoly on the Sale of a Computer

question 597

Multiple Choice

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50th game, the firm will always receive

• A) less marginal revenue on the 50th game than it received on the 49th game.
• B) more average revenue on the 50th game than it received on the 49th game.
• C) more total revenue on the 50 games than it received on the first 49 games.
• D) Both b and c are correct.

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Definitions:

Marginal Revenue

The supplementary earnings obtained by selling one more unit of a good or service.

Profit-Maximizing

The process or strategy of adjusting production and pricing to achieve the highest possible profit.

MR = MC

A condition where the marginal revenue (MR) equals marginal cost (MC), which is the profit maximizing level of output for a firm under perfect competition.

Marginal Revenue

The increased income derived from the sale of one extra unit of a good or service.