Why is marginal revenue for a monopolist less than the sales price?
A) As the monopolist expands output, the average total cost of production declines.
B) To sell more units, the monopolist must reduce price on all units sold.
C) When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.
D) The monopolist charges each consumer the highest possible price.

Question

Quizplus · Accepted Answer

Marginal revenue is the change in total revenue resulting from a one-unit increase in output. For a monopolist, the demand curve is downward sloping, which means it must lower the price of all products sold in order to sell an additional unit. This reduction in price results in a lower marginal revenue than the sales price.

Why Is Marginal Revenue for a Monopolist Less Than the Sales