At any positive level of output, the monopoly's marginal revenue
A)curve is greater than its demand curve.
B)is greater than its average revenue.
C)equals marginal cost.
D)is less than price.
E)equals price.

Question

Quizplus · Accepted Answer

A monopoly's marginal revenue is always less than the price because the firm must lower the price for all units sold in order to sell one additional unit. This means that the demand curve and marginal revenue curve are downward sloping, but the marginal revenue curve will always be below the demand curve. At any level of output, the marginal revenue reflects the change in revenue from producing and selling one additional unit, and this change in revenue will always be less than the price for the last unit sold.

At Any Positive Level of Output, the Monopoly's Marginal Revenue