For a pure monopolist, the relationship between total revenue and marginal revenue is such that
A)marginal revenue is positive when total revenue is at a maximum.
B)total revenue is positive when marginal revenue is increasing, but total revenue becomes negative when marginal revenue is decreasing.
C)marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.
D)marginal revenue is positive so long as total revenue is positive.

Question

Quizplus · Accepted Answer

Marginal revenue (MR) is the additional revenue that a firm receives from selling one more unit of a good or service. For a monopolist, as long as total revenue (TR) is increasing, MR is positive because each additional unit sold adds to total revenue. However, due to the downward-sloping demand curve that a monopolist faces, there comes a point where selling additional units will cause the price to drop enough that total revenue begins to decrease. At this point, MR becomes negative because selling an additional unit reduces total revenue.

For a Pure Monopolist, the Relationship Between Total Revenue and Marginal