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How does lowering the price of driveways affect the marginal revenue for a monopoly concrete contractor?

a. $500.

b. $199,500.

c. - $500.

d. $9,500.

Answer: The marginal revenue of the 21st driveway is - $500.

When a monopoly concrete contractor decides to lower the price of driveways in order to increase sales, it affects the marginal revenue calculation. In this scenario, the contractor is building 20 driveways per month for $10,000 each. By decreasing the price to $9,500 for the 21st driveway, the marginal revenue turns out to be negative, specifically - $500.

To understand this calculation, we first need to find the total revenue from 20 driveways. This can be calculated by multiplying the number of driveways (20) by the price of each driveway ($10,000). Therefore, the total revenue from 20 driveways is 20 x $10,000 = $200,000.

Next, we calculate the revenue from 21 driveways using the new price of $9,500 for each driveway. By multiplying the number of driveways (21) by the new price, we get 21 x $9,500 = $199,500.

Subtracting the total revenue from 21 driveways ($199,500) from the total revenue from 20 driveways ($200,000) gives us the marginal revenue of the 21st driveway, which is -$500. This negative value indicates a decrease in revenue due to the price reduction to attract more customers.