Question

A pure monopoly can sell 20 toys per day for $8 each. To sell 21 toys per day, the price must be cut to $7. The marginal revenue of the 21st toy is

Answer 1

Answer:

-13$

Explanation:

Answer 2

The marginal revenue of the 21st toy is a $13 loss.

What is a monopoly?

A monopoly is defined as therm when the product or service is one of its kind and there are no other options available for the buyer. A monopoly is said when the company is the only one making that product and there are no substitutes available. i.e, there is a single seller in the market.  some examples of monopolies are gas, electricity, water, etc.

A pure monopoly can sell 20 toys per day for $8 each.

To sell 21 toys per day, the price must be cut to $7 each.

The marginal revenue of the 21st toy is $-13

20x8= 160  

2187=147

160-147=13 (13 losses)

If total revenue declines as the output increase under a downward-sloping linear demand curve, marginal revenue will be negative. Marginal revenue can be positive, negative, and even zero.

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