Final answer:
A monopolist is a price setter, controlling the quantity produced and the price. Total revenue for a monopolist follows a unique pattern, first increasing then decreasing as output rises. Marginal revenue declines with additional output due to the decreasing price necessary to sell more units.
Step-by-step explanation:
A monopolist is a price setter because it controls the total quantity produced and thus has control over the price. Unlike in perfect competition where firms are price takers, a monopolist faces a downward-sloping demand curve and must lower the price to sell additional units. This unique market position means that total revenue and marginal revenue behave differently for a monopolist.
Total revenue for a monopolist is not constantly increasing with quantity. It starts low, rises, and then eventually declines as the quantity increases. This is because selling more at a high quantity necessitates a lower price, diminishing total revenue at very high output levels. Similarly, the marginal revenue declines as more units are produced, because not only does the monopolist receive less revenue per additional unit, but they also must lower the price on all units sold, affecting total revenue.
No monopolist can escape the constraints of market demand. Even with high barriers to entry, a monopolist must consider consumer responsiveness to price changes. Because the monopolist's demand curve is the market demand curve, it is downward-sloping, indicating that higher prices will lead to lower quantity demanded, and vice-versa.