When a monopolist sells additional units,
A) total revenue always increases.
B) marginal revenue is constant.
C) total revenue always decreases.
D) marginal revenue increases.
E) total revenue may increase,decrease,or remain unchanged.

Question

Quizplus · Accepted Answer

When a monopolist sells additional units, total revenue may increase, decrease, or remain unchanged. This is because a monopolist faces a downward-sloping demand curve, meaning that in order to sell more units, they must lower their price. As a result of lowering the price, the monopolist earns less revenue per unit sold. However, selling more units may make up for the decrease in revenue per unit, resulting in an overall increase in total revenue. On the other hand, if the decrease in revenue per unit outweighs the increase in the number of units sold, total revenue may decrease. Therefore, the correct answer is E.

When a Monopolist Sells Additional Units