Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve.When selling the 100ᵗʰ widget,the firm will always receive
A)less marginal revenue on the 100ᵗʰ widget than it received on the 99ᵗʰ widget.
B)more average revenue on the 100ᵗʰ widget than it received on the 99ᵗʰ widget.
C)more total revenue on the 100 widgets than it received on the first 99 widgets.
D)a lower average cost per unit at 100 units output than at 99 units of output.

Question

Quizplus · Accepted Answer

A monopolist facing a downward-sloping demand curve has to lower the price of each additional unit in order to sell it. This means that the marginal revenue received on the 100th widget will be lower than the marginal revenue received on the 99th widget. In other words, the firm will have to decrease the price of the 100th widget in order to sell it, which will lead to a lower marginal revenue. Therefore, choice A is the correct answer.

Suppose a Firm Has a Monopoly on the Sale of Widgets