The marginal revenue curve for a monopolist__________.
A) is a straight, upward sloping curve.
B) rises at first, reaches a maximum, and then declines.
C) becomes negative when output increases beyond some particular level.
D) is a straight line, parallel to the horizontal axis..

Monopoly occurs when there is a single firm or individual selling a particular good or rendering a particular services. In this situation, the monopolist is the price maker and has extensive market control.

However, the Marginal revenue curve of a monopoly is negatively sloped and lies below average revenue.

This is because take for instance, a firm produces and Sells biscuit for $4. At that price, buyers are willing to buy not more than 10. However, if the firm wants to increase quantity sold from 10 to let say 15, they will need to lower the prices. Now in doing so, the marginal revenue becomes negative. This is as a result of the reduction in price in order to sell more quantity. Remember that marginal revenue is the revenue gained by producing one extra unit of product.

So, in reality, the firm actually increases in total revenue because they end up selling more, but also reduces the marginal revenue while doing so.

The marginal revenue curve for a monopolist__________. A) is a straight, upward sloping curve. B) rises at first, reaches a maximum, and then declines. C) becomes negative when output increases beyond some particular level. D) is a straight line, parallel to the horizontal axis..

Answer :

Other Questions

The marginal revenue curve for a monopolist__________.
A) is a straight, upward sloping curve.
B) rises at first, reaches a maximum, and then declines.
C) becomes negative when output increases beyond some particular level.
D) is a straight line, parallel to the horizontal axis..