A monopolist will never operate on the lower half of the demand curve because for this range of output:
A)average revenue is negative.
B)marginal cost exceeds marginal revenue.
C)total revenue can be increased further.
D)marginal revenue is positive.

Question

Quizplus · Accepted Answer

Operating on the lower half of the demand curve means producing a lower quantity of output, which would lead to a higher price. However, for a monopolist, the marginal cost exceeds marginal revenue in this range of output, meaning that producing less would actually result in higher average cost and lower profit. Therefore, the monopolist chooses to operate at a higher output level where the marginal revenue exceeds marginal cost.

A Monopolist Will Never Operate on the Lower Half of the Demand