Assume someone organizes all farms in the nation into a single-price monopoly.What is the monopoly's marginal revenue curve?
A) It is a horizontal line at the competitive industry's price.
B) It is a line that lies below the new monopoly's demand curve.
C) It is a vertical line at the monopoly's chosen output level.
D) It is identical to the demand curve for the monopolist's output.
E) It is a line that lies above the new monopoly's demand curve.

Question

Quizplus · Accepted Answer

The marginal revenue curve for a monopoly lies below the demand curve because, to sell additional units, the monopolist must lower the price not only on the additional units but also on all previous units sold. This results in a marginal revenue that is less than the price for each additional unit sold, hence the marginal revenue curve lies below the demand curve.

Assume Someone Organizes All Farms in the Nation into a Single-Price