The demand curve facing a monopolist:
A) is the same as its marginal revenue curve.
B) is perfectly elastic.
C) is perfectly inelastic.
D) is less elastic than a perfectly competitive firm's demand curve.

Question

Quizplus · Accepted Answer

A monopolist has market power, meaning it can influence the price of its product. As a result, the demand curve facing a monopolist is less elastic (or more steep) than a perfectly competitive firm's demand curve. In contrast, a perfectly competitive firm faces a perfectly elastic demand curve. The monopolist's marginal revenue curve lies below its demand curve because it must lower the price of all units of output in order to sell additional units. Therefore, choice A is incorrect, and choices B and C are extreme and unlikely scenarios.

The Demand Curve Facing a Monopolist