The marginal revenue of a monopolist is:
A) Less than price because a monopolist is a price taker.
B) Less than price because to sell more output the firm must reduce the price on all units sold.
C) Above price because the firm is a price setter.
D) Always equal to price.

Question

Quizplus · Accepted Answer

A monopolist is the sole producer of a good and has the power to set the price of the good. In order to sell more units of output, the monopolist must reduce the price on all units sold, resulting in a decrease in marginal revenue. Thus, the marginal revenue of a monopolist is less than the price.

The Marginal Revenue of a Monopolist Is