For a monopolist, the reason that marginal revenue is less than price is
A) because of the perfectly elastic demand curve that the monopolist faces.
B) because the monopolist must lower the price of the good in order to sell an additional unit.
C) because of the U-shaped average revenue curve.
D) because of the lack of competition in the market.

Question

Quizplus · Accepted Answer

For a monopolist, marginal revenue is less than price because the monopolist must lower the price of the good in order to sell an additional unit. This is because the monopolist is the sole seller in the market and can only increase quantity sold by lowering the price, which means that the additional units sold will yield a lower price than the previous ones. This leads to a downward-sloping marginal revenue curve for a monopolist.

For a Monopolist, the Reason That Marginal Revenue Is Less