Question

Wendy has a monopoly in the retailing of motor homes. She can sell 5 per week at $21,000 each. If she wants to sell 6, she can charge only $20,000 each. The quantity effect of selling the 6th motor home is:

Answer 1

Solution:

→Cost of Single motor home which is decided by Wendy=$ 21,000

So,Cost of Five motor homes= $21,000 × 5=$ 105,000

→If, Wendy sells 6 motor homes ,she will charge $ 20,000.

Cost of Five motor homes= $20,000 × 6=$ 1,20,000

→If, Wendy has sold 6 motor homes at the rate of $ 21,000

then,  Cost of six motor homes= $21,000 × 6=$ 1,26,000

She is in loss of →,$ 1,26,000-$ 1,20,000=$ 6,000