The marginal revenue of the monopolist is ____________.

Larger than price

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Equal to price

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Smaller than price

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Any of the above is possible

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Solution

The correct option is B Smaller than price
In a monopoly, the marginal revenue is lower than the price because the demand curve is downward sloping. When prices go down, more units of the product are bought. Because of this, marginal revenue will not always equal price.

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The marginal revenue is equal to the price for a monopoly firm. State true or false.

Why is the average revenue curve of a monopolist less elastic than the average revenue curve of a firm under monopolistic competition? Explain.

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