Question

For a monopolist, marginal ____ is lower than ____ because the lower price of an extra unit of output also applies to all prior units of output.

Answer 1

A monopolist's marginal revenue is always less than the price because the monopolist must lower the price to sell additional output.

Step-by-step explanation:

The marginal revenue curve for a monopolist always lies beneath the market demand curve. This is because a monopolist faces a downward sloping demand curve, and in order to sell additional output, the monopolist must lower its price. When a monopolist increases sales by one unit, it gains some marginal revenue from selling that extra unit, but also loses some marginal revenue because it must now sell every other unit at a lower price.