Scenario: When a monopolist charges $10 for its product, it sells 500 units of t

Question

Scenario: When a monopolist charges $10 for its product, it sells 500 units of the product. When it lowers the price to $6, it sells 1,400 units of the product. 4) Refer to the scenario above. What is the quantity effect of the price change? A) $1,400 B) $2,700 C) $5,400 D) $6,750 5) Refer to the scenario above. What is the price effect of the price change? A) $1,750 B) $2,000 C) $3,750 D) $5,400 6) Refer to the scenario above. What is the change in total revenue due to the price change? A) The total revenue increases by $350. B) The total revenue increases by $3,400. C) The total revenue decreases by $1,650. D) The total revenue decreases by $2,275.

Explanation / Answer

4) A) $1400

5)D) $5,400

6)B)total revenue increases by $3,400 as TR1=p1.q1= 10×500=5000.TR2=p2.q2=1400×6=8400.where p is price and q is quantity. So, change in total revenue =TR2-TR1=8400-5000=$3,400.

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