Question

How is the marginal revenue of a monopolist?

• A. More than price
• B. Equal to price
• C. Less than price
• D. Less than marginal cost

Answer 1

Answer: (C)

Less than price

If you assume the monopolist charges same price to all consumers for its goods, then the marginal revenue curve would be downward slopping. This in simpler terms mean that every additional unit sold brings in lesser and lesser revenue to the seller. Reason for this is, as the monopolist want to increase the profit he reduces prices so that more of the good is sold. Due to this even the buyers who could pay a higher price end up paying lower price.