If a firm faces a downward-sloping demand curve,its marginal revenue is
A)less than its marginal cost
B)greater than price
C)less than price
D)equal to price
E)equal to its total revenue

Question

Quizplus · Accepted Answer

When a firm faces a downward-sloping demand curve, it can only increase its sales by lowering the price. Therefore, the marginal revenue (the additional revenue generated by selling one more unit) will always be less than the price. In other words, the firm has to lower the price to sell one more unit, which means that the additional revenue generated by that sale will be less than the original price. Thus, the correct answer is (C) less than price.

If a Firm Faces a Downward-Sloping Demand Curve,its Marginal Revenue