A monopolist's marginal-revenue curve is less than price for which of the following reasons?
(i) to sell additional units of the good, the price charged on all units must decrease
(ii) with the sale of an additional unit, the monopolist receives less revenue for each of the previous units it planned to sell
(iii) because of the downward-sloping demand curve
A)(i) and (ii)
B)(ii) and (iii)
C)(i) and (iii)
D)(i), (ii) and (iii)

Question

Quizplus · Accepted Answer

All three reasons contribute to why a monopolist's marginal-revenue curve is less than the price. (i) To sell more units, a monopolist must lower the price on all units, not just the additional ones, which decreases revenue per unit. (ii) This price reduction means the monopolist earns less revenue on the units it could have sold at a higher price. (iii) The downward-sloping demand curve necessitates these price reductions to increase sales, further explaining the discrepancy between marginal revenue and price.

A Monopolist's Marginal-Revenue Curve Is Less Than Price for Which