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Unformatted text preview: per unit and a total revenue of $20 (2 $10). Now, consider what happens when the monopolist increases its output to 3 units. The price that the monopolist can expect to receive falls to $8 per unit. At this new lower price, the total revenue the monopolist receives for the first two units of output it supplies falls from $20 to $16 (2 $8), a loss of $4. The monopolist's marginal revenue is equal to the $8 that it receives from the third unit sold minus the loss in total revenue that it receives on the first two units due to the new lower price. Hence, the marginal revenue the monopolist receives from the third unit sold is $8 $4 = $4, which is below the market price of $8....
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This note was uploaded on 11/19/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.
- Fall '10