Question

Table 2 Shows Media Cable’s demand table, total revenue, and marginal revenue at each price. Why, at any price lower than $130, is the marginal revenue from an additional sale less than the price?

Table 2

Price	Amount Demanded	Total Revenue	Marginal Revenue
$160	0	$0	n/a
$130	90	$11,700	$130.00
$100	200	$20,000	$75.45
$80	350	$28,000	$53.33
$40	600	$24,000	-$16.00
$0	850	$0	-$96 .00

Question 5 options:

	a) Lowering the price means that Media Cable lowers the price on all cable packages sold, and the combination of the price effect and quantity effect work together to reduce the Marginal Revenue.
	b) Marginal revenue is calculated by dividing the change in quantity into the change in Total Revenue.
	c) The price effect tends to increase Total Revenue.
	d) The quantity effect tends to decrease Total Revenue.
	e) It cost less to provide a service in bulk. Looking at differences between a single firm within a perfectly competitive market and a monopoly, which of the following is true? Question 1 options: a) A single firm within a perfectly competitive market, sees the entire downward sloping demand curve of the perfectly competitive market. b) A single firm within the perfectly competitive market can set its price at any level and will not see a change in the demand. c) Because it is the only producer in the market, the monopoly sees the entire downward sloping demand curve of the market. d) Because it is the only producer in the market, the monopoly will sell the same amount, no matter what price it charges. e) A single firm within a perfectly competitive market must be concerned about the impact of the price effect and the quantity effect.

Answer 1

5. a. Lowering the price means that Media Cable lowers the price on all cable packages sold, and the combination of the price effect and quantity effect work together to reduce the Marginal Revenue
(MR decreases with decrease in price because price on all units sold is decreased so price and quantity effects reduces MR.)

1. c. Because it is the only producer in the market, the monopoly sees the entire downward sloping demand curve of the market.
(For a competitive firm, demand curve is horizontal and for a monopoly, it is entire downward sloping demand curve as it is the only producer.)