The monopolist's marginal revenue curve lies below the demand curve because
A) the monopoly is not an efficient producer
B) as the monopolist increases output, the price falls
C) there is no account of implicit costs
D) the monopolist's demand curve is the market demand
E) the monopolist can charge the highest price possible

Question

Quizplus · Accepted Answer

The marginal revenue curve for a monopolist lies below the demand curve because, to sell additional units, the monopolist must lower the price not only on the additional units but also on all previous units sold. This results in a marginal revenue that is less than the price at which the additional units are sold.

The Monopolist's Marginal Revenue Curve Lies Below the Demand Curve