The diagram below shows the demand curve facing a single-price monopolist. The firm is currently at point A on the demand curve, selling 20 units of output at a price of $160 per unit.

a. Calculate TR at each point along the demand curve, through H.

b. Suppose the firm reduces the price from $160 to $140. Calculate the revenue it will give up on the units it was already selling. Calculate the revenue it will gain on the new units it will sell. What is the firm?s marginal revenue by moving from point A to point B?

c. Calculate the marginal revenue for each increment of 10 additional units the firm sells, from B to C, C to D, and so on. Plot the MR curve on the diagram.

d. Explain in words why the MR curve facing a single-price monopolist is different than the MR curve facing a perfectly competitive firm.

Transcribed Image Text:

180 160 140 120 100 80 60 40 н 20 Demand 10 20 30 40 50 60 70 80 90 100 Quantity Price