The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why
A)there are barriers to entry in pure monopoly.
B)a monopoly has a perfectly elastic demand curve.
C)marginal revenue is less than average revenue.
D)total revenues are greater than total costs at the profit maximizing level of output.

Question

Quizplus · Accepted Answer

Marginal revenue is less than average revenue for a nondiscriminating pure monopolist because to sell more units, the monopolist must lower the price on all units sold, not just the additional units. This price reduction applies to all units sold, which means the additional revenue generated by selling one more unit (marginal revenue) is less than the average revenue per unit.

The Nondiscriminating Pure Monopolist Must Decrease Price on All Units