Question

A monopolist can sell 26,000 units at a price of $30 per unit. lowering price by $1 raises the quantity demanded by 1,000 units. what is the change in total revenue resulting from this price change?
a. $1,500
b. $3,000
c. $5,500
d. -$2,800

Answer 1

If he sells the shares at 30 per unit, the equation would be:
30*26000=780000

If he lowers the price to 29 per unit and ups the demand by 1k, it would be:
29*27000=783000

The resulting change would net him an additional 3000 dollars, so your answer would be B.

Answer 2

Change in total revenue is $3,000

Given that;

Unit sells = 26,000

Cost of each unit = $30

New cost per unit = $30 - $1 = $29

New quantity demanded = 26,000 + 1,000 = 27,000

Find:

Change in total revenue

Computation:

Change in total revenue = New revenue - Old revenue

Change in total revenue = [(27000)(29)] - [(26000)(30)]

Change in total revenue = 783,000 - 780,000

Change in total revenue = $3,000

So, Option "B" is the correct answer to the following question.

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