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Explain why the monopolist’s demand and marginal revenue curves are not the same. Graphically show a...

Explain why the monopolist’s demand and marginal revenue curves are not the same. Graphically show a monopolist’s short-run profit-maximizing price and quantity. Explain what determines whether a firm is a price taker or a price searcher. 


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Answer #1

Demand curve and MR curve for a monoplist aren't same because it faces a downward sloping demand curve instead of a line parallel to X Axis. So in order to sell more it needs to cut price on all succeeding units hence earning less marginal revenue than the price of the next product. ( The price it could've received if there was no reduction in price). Hence AR and MR are not same. and AR > MR.

A firm is a price taker or maker depends on the level of competition it faces. As a firm in perfect

Competition will be a price taker and a firm in imperfect competition is a price maker because of its powers to influence market.

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