Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve. When selling the 100^th widget, the firm will always receive A)less marginal revenue on the 100^th widget than it received on the 99^th widget. B)more average revenue on the 100^th widget than it received on the 99^th widget. C)more total revenue on the 100 widgets than it received on the first 99 widgets. D)a lower average cost per unit at 100 units of output than at 99 units of output.

Question

Quizplus · Accepted Answer

Marginal revenue is the change in total revenue from selling one more unit of output. As the demand curve is downward-sloping, the price of each additional unit sold must be lower than the price of the previous unit. Therefore, the marginal revenue from selling the 100th widget will be less than the marginal revenue from selling the 99th widget.

Suppose a Firm Has a Monopoly on the Sale of Widgets