Tommy’s Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy’s is able to engage in perfect price discrimination.
Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is the marginal revenue from selling the 5th tie?
a. $80
b. $100
c. $110
d. $120
Answer: a. $80
The marginal revenue from selling the 5th tie is equal to the difference between the total revenue by selling 5 ties and the total revenue by selling 4 ties.
So the marginal revenue by selling the 5th tie = $600 - $520 = $80
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