Asked by Ashley Mayer on Jun 19, 2024
Verified
For a pure monopolist,marginal revenue is less than price because:
A) the monopolist's demand curve is perfectly elastic.
B) the monopolist's demand curve is perfectly inelastic.
C) when a monopolist lowers price to sell more output,the lower price applies to all units sold.
D) the monopolist's total revenue curve is linear and slopes upward to the right.
Price Elasticity
A measure of how much the quantity demanded of a good or service changes in response to a change in its price.
Monopolist
A market participant who is the sole supplier of a particular good or service, possessing significant market power and able to influence price and market conditions.
- Comprehend how a monopolist's marginal revenue differs from price and impacts profit maximization.
Verified Answer
OB
Orawan BreenJun 21, 2024
Final Answer :
C
Explanation :
A pure monopolist has market power and so can set the price of their product. However, in order to sell more units, the monopolist must lower the price on all units sold, hence the marginal revenue gained from selling an additional unit is less than the price. This is because the monopolist faces a downward-sloping demand curve, meaning that to sell more units, they must lower the price on all units, resulting in lower marginal revenue. Therefore, the answer is C.
Learning Objectives
- Comprehend how a monopolist's marginal revenue differs from price and impacts profit maximization.
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