As a monopolist increases the quantity of output produced, what happens to price (P)and marginal revenue (MR)?
A)both P and MR remain constant
B)P is constant, but MR decreases
C)P decreases, but MR is constant
D)both P and MR decrease, but P falls faster than MR
E)both P and MR decrease, but MR falls faster than P

Question

Quizplus · Accepted Answer

In a monopoly, as output increases, the price must decrease to sell additional units, leading to a decrease in both price and marginal revenue. However, marginal revenue falls faster than price because the monopolist must lower the price on all units sold, not just the additional unit.

As a Monopolist Increases the Quantity of Output Produced, What