For a single-price monopolist, as output increases, total revenue
A) initially increases and then decreases.
B) initially decreases and then increases.
C) increases continually.
D) decreases continually.

Question

Quizplus · Accepted Answer

As output increases, the monopolist faces a downward sloping demand curve. Initially, the increase in output leads to an increase in total revenue as the additional revenue from selling one more unit is greater than the reduction in price needed to sell that extra unit. However, as output continues to increase, the reduction in price required to sell each additional unit becomes greater than the additional revenue earned, leading to a decrease in total revenue. Therefore, total revenue initially increases and then decreases as output increases.

For a Single-Price Monopolist, as Output Increases, Total Revenue