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28. For a seller with market power, its marginal revenue is: Select one: a. greater than...

28. For a seller with market power, its marginal revenue is:

Select one:

a. greater than price

b. equal to price

c. smaller than marginal cost

d. smaller than price

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Homework Answers

Answer #1

Option D.

  • A firm or a seller is said to have market power if it enjoys greater economies of scale and has the ability to change and maintain prices.
  • For such a firm or a seller, marginal revenue is always smaller than the price.
  • This is because, if they raise the price, then they would lose their customers. Hence they are forced to charge less in order to sell more units.
  • Therefore their marginal revenue curve always lies below the demand curve and they earn less marginal revenue.
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