For a nondiscriminating monopolist, describe the relationship between market price (P), average revenue (AR), and marginal revenue (MR). A)P = AR = MR B)P AR = MR C)P = AR MR D)P AR MR E)P = AR

Question

For a nondiscriminating monopolist, describe the relationship between market price (P), average revenue (AR), and marginal revenue (MR).
A)P = AR = MR
B)P > AR = MR
C)P = AR > MR
D)P > AR > MR
E)P = AR < MR

Quizplus · Accepted Answer

A nondiscriminating monopolist faces a downward-sloping demand curve and has to reduce the price on all units sold to increase the total quantity demanded. Therefore, the market price (P) is always lower than the average revenue (AR). However, the marginal revenue (MR) curve lies below the AR curve due to the diminishing returns. Therefore, the relationship between P, AR, and MR is P = AR > MR.

For a Nondiscriminating Monopolist, Describe the Relationship Between Market Price