Which of the following is true?
A) Instead of applying the marginal decision rule, monopoly firms just set the price as high as possible.
B) If demand is downward sloping, P = MR.
C) If demand is downward sloping, P = ATC.
D) If demand is downward sloping, P MR.

Question

Which of the following is true?
A) Instead of applying the marginal decision rule, monopoly firms just set the price as high as possible.
B) If demand is downward sloping, P = MR.
C) If demand is downward sloping, P = ATC.
D) If demand is downward sloping, P > MR.

Quizplus · Accepted Answer

In a downward sloping demand curve, the price (P) a consumer is willing to pay for one more unit (marginal unit) is higher than the additional revenue (MR) the firm gets from selling that unit. This is because, in order to sell one more unit, the firm often has to lower the price for all units sold, not just the marginal unit, leading to P > MR. Choices A, B, and C are incorrect as they oversimplify or misrepresent economic principles regarding monopolies, price setting, and cost relationships.

Which of the Following Is True