For a monopolist, the marginal revenue gained when one more unit of output is sold is
A) the price at which the extra unit is sold minus the loss in revenue that results from cutting the price on units sold previously.
B) equal to the price of the product.
C) negative if price is above the midpoint of the demand curve.
D) the average revenue created by the increased sales.

Question

Quizplus · Accepted Answer

As a monopolist, selling one more unit of output would require the monopolist to either decrease the price of all units sold or sell the extra unit at a lower price. This results in a loss of revenue on previously sold units. Therefore, the marginal revenue gained is the price at which the extra unit is sold minus the loss in revenue from the previously sold units.

For a Monopolist, the Marginal Revenue Gained When One More