- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 6. Marginal Revenue, Marginal Cost, and Profit Maximization
CFA Practice Question
If a monopolist increases sales from 10 to 11 by lowering its price from $40 to $38, its marginal revenue is ______.
A. $2
B. $18
C. $418
Explanation: Total revenue increases from $400 to $418, so marginal revenue is $18. $2 is the change in average revenue.
User Contributed Comments 4
| User | Comment |
|---|---|
| micheleus | I think it should be 38$. (10*40 + 38)- (10*40) = 38 |
| charliedba | No micheleus. 38 x 11 - 400 = 18. |
| serboc | Marginal Revenue is the addition to TOTAL REVENUE. |
| YOUCANDOIT | unless it is price discriminating, when a monopoly increases price to increase marginal sales, it also increases the price for all previous unit as well. chaliedba's explanation is correct b/c the firm is now selling all 11 units @ $38each. |