The marginal revenue curve for a monopolist
A)is identical to its demand curve.
B)is always below its demand curve if the demand curve is downward sloping.
C)is always below its demand curve if the demand curve is horizontal.
D)typically crosses the average revenue curve.

Question

Quizplus · Accepted Answer

The marginal revenue curve for a monopolist is always below its demand curve if the demand curve is downward sloping. This is because the monopolist must lower the price of all the units it sells in order to sell one additional unit, which reduces the revenue of all the units sold. Therefore, the marginal revenue is always less than the price of the last unit sold, resulting in a downward-sloping marginal revenue curve that lies below the demand curve. The other options are not always true. The monopolist's marginal revenue curve is not identical to its demand curve (A), it may be above or below the demand curve depending on the elasticity of demand (C), and it does not typically cross the average revenue curve as it is always below it (D).

The Marginal Revenue Curve for a Monopolist