For the monopolist, marginal revenue is less than average revenue.

Question

Quizplus · Accepted Answer

Monopolies have the power to set their own price, but they face a downward sloping demand curve. This means that as they increase the quantity of output sold, they must lower the price to entice consumers to buy more. As a result, marginal revenue (the revenue earned from selling an additional unit) is less than the price (which is equivalent to average revenue) for the monopolist. The monopolist faces a downward-sloping demand curve and in order to sell more units, they must lower the price for all units. This means that the marginal revenue earned from selling an additional unit is less than the average revenue earned from selling all units.

For the Monopolist, Marginal Revenue Is Less Than Average Revenue