Marginal revenue for a monopolist is:
A)equal to price.
B)greater than price.
C)not equal to price.
D)the change in total revenue divided by the change in output.

Question

Quizplus · Accepted Answer

Marginal revenue for a monopolist is not equal to price because the monopolist has market power and can influence the price by adjusting its output. If the monopolist increases its output, the price will decrease, and if it decreases its output, the price will increase. Therefore, MR=P(1+1/Ed) where Ed is the price elasticity of demand, and since Ed<0 for a monopolist, MR<P.

Marginal Revenue for a Monopolist Is