Figure 14.1.1
-Other things being equal, the marginal revenue product (MRP) curve for a competitive seller:
A) lies below the MRP curve for a monopolist.
B) is identical to the MRP curve for a monopolist.
C) lies above the MRP curve for a monopolist.
D) is upward sloping whereas a monopolist has a downward sloping MRP curve.

Question

Figure 14.1.1
-Other things being equal, the marginal revenue product (MRP) curve for a competitive seller:
A) lies below the MRP curve for a monopolist. 
B) is identical to the MRP curve for a monopolist. 
C) lies above the MRP curve for a monopolist. 
D) is upward sloping whereas a monopolist has a downward sloping MRP curve.

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price-takers and the price is equal to the marginal revenue. Therefore, the MRP curve for a competitive seller is the same as the demand curve for their product. On the other hand, in a monopolistic market, the firm has market power and can influence the price by reducing output. This results in a downward sloping MRP curve. As a result, the MRP curve for a competitive seller lies above the MRP curve for a monopolist.

Figure 14.1.1 -Other Things Being Equal, the Marginal Revenue Product (MRP) Curve