CFA Practice Question

There are 539 practice questions for this study session.

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.
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