The marginal revenue curve of a monopoly will
A)decrease at a faster rate than price because any reduction in price applies to all units sold.
B)lie above the demand curve.
C)increase at a faster rate than price because marginal revenue is always greater than price.
D)decrease at a faster rate than price because any reduction in price applies only to extra units sold.
E)equal the demand curve.

Question

Quizplus · Accepted Answer

Marginal revenue for a monopolist decreases at a faster rate than price because when a monopolist reduces the price to sell one more unit, the lower price applies to all units sold, not just the additional unit. This causes the marginal revenue to drop more quickly than the price itself.

The Marginal Revenue Curve of a Monopoly Will