As a monopolist facing a downward-sloping demand curve increases sales from zero,total revenue
A) remains unchanged.
B) rises steadily to equal price.
C) falls until it equals marginal revenue.
D) equals demand.
E) rises at first but eventually falls.

Question

Quizplus · Accepted Answer

As a monopolist increases sales from zero, total revenue first rises due to higher quantity sold, but eventually falls due to the decreasing price effect of moving down the downward-sloping demand curve. This is because the monopolist must lower the price on all units sold to capture the additional sales, resulting in a lower marginal revenue for additional units sold.

As a Monopolist Facing a Downward-Sloping Demand Curve Increases Sales