At the point where the marginal revenue equals zero for a monopolist facing a downward-sloping straight-line demand curve, total revenue is:
A) greater than 1.
B) maximum.
C) less than 1.
D) equal to zero.
E) not determinable.

Question

Quizplus · Accepted Answer

The point where marginal revenue equals zero for a monopolist is also known as the profit-maximizing level of output. It is the level of output at which the additional revenue gained from producing one more unit of output (marginal revenue) is equal to the additional cost incurred (marginal cost). At this level of output, the monopolist is maximizing its profit. Since total revenue is equal to price multiplied by quantity, and the monopolist is facing a downward-sloping demand curve, the maximum point of total revenue will occur at the profit-maximizing level of output. Therefore, the correct answer is B, total revenue is maximum.

At the Point Where the Marginal Revenue Equals Zero for a Monopolist