For a monopolist, marginal revenue is:

Question

Quizplus · Accepted Answer

The marginal revenue for a monopolist is the change in total revenue resulting from producing an additional unit of output. However, since the monopolist is the sole producer in the market, it must lower the price of all units sold in order to sell an additional unit. This means that the price effect is always negative (the price reduction on all units sold), but the output effect can be positive or negative depending on how much additional revenue is generated from selling that additional unit. If the output effect is greater than the price effect, then marginal revenue is positive, but if the price effect is greater than the output effect, then marginal revenue is negative. Therefore, the correct answer is B, negative when the price effect is greater than the output effect.

For a Monopolist, Marginal Revenue Is