Final answer:
Marginal revenue in a monopoly is less than the price for all units sold after the first because selling more units requires lowering the price for all units, not just the additional one. The marginal revenue for the first unit is equal to its price.
Step-by-step explanation:
The question revolves around why in a pure monopoly, marginal revenue is less than the price for all units of output except the first.
To unpack this concept, it's essential to understand that a monopolist's marginal revenue curve lies beneath the market demand curve.
This occurs because when a monopolist sells an additional unit, they can only do so at a lower price since the demand curve is downward sloping; implying the entire quantity being sold is at that reduced price.
Consequently, while the firm gains marginal revenue from the additional unit, it also loses some of the revenue on all previous units due to the price drop.
This trade-off results in marginal revenue being less than the price. The only exception is the first unit sold, where the marginal revenue indeed equals the market price.