For a pure nondiscriminating monopolist, marginal revenue is less than price because
A) the monopolist's demand curve is perfectly elastic.
B) the monopolist's demand curve is perfectly inelastic.
C) when a monopolist lowers price to sell more output, the lower price applies to all units sold.
D) the monopolist's total revenue curve is linear and slopes upward to the right.

Question

Quizplus · Accepted Answer

When a pure non-discriminating monopolist lowers price to sell more output, the lower price applies to all units sold. This means that marginal revenue, which is the change in total revenue from selling one additional unit, will be lower than the price for all units sold. In other words, the monopolist has to reduce price on all units to sell more, leading to lower marginal revenue than price.

For a Pure Nondiscriminating Monopolist, Marginal Revenue Is Less Than