Question

For a monopoly, marginal revenue is less than price because A the firm is a price taker B the firm must lower price if it wishes to sell more output C the firm can sell all of its output at any price D the demand for the firm's output is perfectly elastic

Answer 1

B) the firm must lower price if it wishes to sell more output

Step-by-step explanation:

A monopolist's marginal revenue is always less than or equal to the unit price of the good or service it offers. This is because the demand curve is downward sloping, and in order to increase the quantity demanded it must lower its sales price. A monopolist can make economic profit because it can set the price of the product, but in order to maximize its accounting profit it should sell its products at a price that equals marginal cost. It follows the same economic principle as every other type of company.

Other options are wrong because:

• A the firm is a price taker FALSE, IT HAS ENORMOUS MARKET POWER AND CAN SET THE PRICE
• C the firm can sell all of its output at any price FALSE, IF THE PRICE IS TOO HIGH CONSUMERS WILL STOP BUYING, THE DEMAND CURVE IS DOWNWARD SLOPING
• D the demand for the firm's output is perfectly elastic FALSE, A PERFECTLY ELASTIC DEMAND CURVE IS HORIZONTAL, AND A MONOPOLY'S DEMAND CURVE IS DOWNWARD SLOPING

Answer 2

B the firm must lower price if it wishes to sell more output

Step-by-step explanation:

A monopoly is when there is only one firm operating in an industry.

The monopoly faces an elastic demand.

The demand curve of a monopoly is downward sloping.

When the price of a monopoly is greater than the marginal revenue, the monopoly should reduce the price in order to increase quantity sold and increase marginal revenue.

I hope my answer helps you