Asked by Deijah Drakeford on Jun 24, 2024
Verified
For a pure nondiscriminating 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.
Nondiscriminating Monopolist
A monopolist who charges all consumers the same price for a product, unlike a price-discriminating monopolist who charges different prices.
Marginal Revenue
The additional income earned by selling one more unit of a product or service, reflecting the incremental increase in total revenue.
- Distinguish and elucidate the distinctions between marginal revenue, total revenue, average revenue, and marginal cost.
- Analyze the decisions around output level and pricing for monopolistic firms aiming for profit maximization.
Verified Answer
JH
Joesph HickeyJul 01, 2024
Final Answer :
C
Explanation :
For a pure nondiscriminating monopolist, marginal revenue is less than price because when the monopolist lowers the price to sell one more unit, the lower price applies to all units sold, not just the additional unit. This means that the additional revenue generated by selling one more unit (marginal revenue) is less than the price at which that unit is sold, due to the reduction in revenue per unit for all previously sold units.
Learning Objectives
- Distinguish and elucidate the distinctions between marginal revenue, total revenue, average revenue, and marginal cost.
- Analyze the decisions around output level and pricing for monopolistic firms aiming for profit maximization.