The following table shows the quantities of a good sold by a monopolist at different prices.

-Refer to the table above.Which of the following statements is true of the monopolist's marginal revenue?
A) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue decreases.
B) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue increases.
C) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue first increases and then decreases.
D) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue first decreases and then increases.

Question

The following table shows the quantities of a good sold by a monopolist at different prices.
 
-Refer to the table above.Which of the following statements is true of the monopolist's marginal revenue?
A) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue decreases. 
B) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue increases. 
C) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue first increases and then decreases. 
D) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue first decreases and then increases.

Quizplus · Accepted Answer

In a monopolistic market, as the price decreases to sell more units, the marginal revenue typically decreases because the additional revenue gained by selling one more unit is less than the price at which that unit is sold. This is due to the monopolist facing a downward-sloping demand curve, meaning they must lower the price to sell additional units, which affects the revenue gained from previously sold units as well.

The Following Table Shows the Quantities of a Good Sold