1
You visited us 1 times! Enjoying our articles? Unlock Full Access!
Question

# The revenue-maximizing level of output for a monopoly firm is 20 units. If the marginal revenue of the first unit sold is Rs 60, what is the maximum total revenue?

A

Rs 300

No worries! Weâ€˜ve got your back. Try BYJUâ€˜S free classes today!
B

Rs 600

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses
C

Rs 900

No worries! Weâ€˜ve got your back. Try BYJUâ€˜S free classes today!
D

Rs 1200

No worries! Weâ€˜ve got your back. Try BYJUâ€˜S free classes today!
Open in App
Solution

## The correct option is B Rs 600 Given that when q=0, MR =60. When revenue is maximized, q=20 and MR=0. Hence, the MR curve is given by the equation MR=60−3q The slope of the MR curve is -3. Since the MR curve is twice as steep as the demand curve, the slope of the demand curve is -1.5. Also, MR and demand curves start from the same point. Hence the equation of the demand curve is p=60−1.5q TR is maximum when MR=0 i.e when q=20 Hence, TR is maximized at an output level of 20. At q=20, the maximum price that the firm can set can be obtained from the demand curve p=60−1.5×20=Rs 30 TR=p×q=30×20=Rs 600

Suggest Corrections
0
Join BYJU'S Learning Program
Related Videos
The Monopolist's Problem
ECONOMICS
Watch in App
Join BYJU'S Learning Program