If a monopolist faces a downward-sloping market demand curve, its:
A)average revenue is always less than marginal revenue
B)marginal revenue is greater than the price of the units it sells
C)marginal revenue is always less than the price of the units it sells
D)average revenue is less than the price of its product

Question

Quizplus · Accepted Answer

A monopolist faces a downward sloping demand curve, which means that in order to sell more units it must lower the price for all units sold. This means that the marginal revenue from selling an additional unit (MR) will be lower than the price of the unit sold (P). Therefore, option C is correct, as the marginal revenue will always be less than the price of the units sold. Option A is incorrect, as in some cases the average revenue may be greater than the marginal revenue. Option B is incorrect, as the marginal revenue will be less than the price of the units sold. Option D is incorrect, as the average revenue may be greater than the price of the product in certain cases.

If a Monopolist Faces a Downward-Sloping Market Demand Curve, Its