For a monopoly,marginal revenue is less than price because
A) the firm is a price taker.
B) the firm must lower price if it wishes to sell more output.
C) the firm can sell all of its output at any price.
D) the demand for the firm's output is perfectly elastic.

Question

Quizplus · Accepted Answer

In a monopoly market structure, the firm is the sole producer of a particular product or service. As such, the firm has control over the price of its output. However, the firm's ability to charge a higher price is limited by the demand for its product. If the firm wishes to sell more output, it must lower the price. This means that the marginal revenue earned by the firm from selling an additional unit of output will be less than the price it charges for that unit. Therefore, option B is the correct answer.

For a Monopoly,marginal Revenue Is Less Than Price Because