When a monopolist increases the amount of output that it produces and sells,its average revenue
A)increases and its marginal revenue increases.
B)increases and its marginal revenue decreases.
C)decreases and its marginal revenue increases.
D)decreases and its marginal revenue decreases.

Question

Quizplus · Accepted Answer

As a monopolist increases the quantity of output, the price it charges must decrease to sell the additional units. This leads to a downward-sloping demand curve and, as a result, the average revenue for each unit sold decreases. Additionally, since the marginal revenue is the change in revenue as a result of producing one more unit, the monopolist must lower the price further to incentivize consumers to purchase the additional unit, leading to a decreasing marginal revenue as well. Thus, both the average revenue and marginal revenue decreases as output increases.

When a Monopolist Increases the Amount of Output That It