For a pure monopolist, the relationship between total revenue and marginal revenue is such that
A) marginal revenue is positive when total revenue is at a maximum.
B) total revenue is positive when marginal revenue is increasing, but total revenue becomes negative when marginal revenue is decreasing.
C) marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.
D) marginal revenue is positive so long as total revenue is positive.

Question

Quizplus · Accepted Answer

For a pure monopolist, marginal revenue is positive when total revenue is increasing, meaning that the monopolist is able to sell additional units of output at a higher price than the previous units. However, as the monopolist continues to increase output, the additional units sold will eventually drive down the price of all units sold, leading to a decrease in total revenue and a negative marginal revenue. Therefore, the relationship between total revenue and marginal revenue is positive initially, but eventually becomes negative.

For a Pure Monopolist, the Relationship Between Total Revenue and Marginal