Consider the following AR and MR curves for a single- price monopolist.
FIGURE 10- 2
-For a single- price monopolist,marginal revenue falls faster than price (as output rises)because

Question

Consider the following AR and MR curves for a single- price monopolist.
  FIGURE 10- 2
-For a single- price monopolist,marginal revenue falls faster than price (as output rises)because

Quizplus · Accepted Answer

The reason for the falling marginal revenue curve is that in order to sell additional units, the monopolist must lower the price on all units sold, resulting in a decrease in revenue not only from the additional sales but also from the units that were already being sold. In other words, the marginal revenue from selling an additional unit is not equal to the price of that unit, but rather it is equal to the change in total revenue from selling that unit. This leads to a faster decrease in marginal revenue compared to price as output increases.

Consider the Following AR and MR Curves for a Single-