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Why is the marginal revenue curve downward sloping for monopolist? a.Consumers are more price elastic for...

Why is the marginal revenue curve downward sloping for monopolist?

a.Consumers are more price elastic for goods sold by monopolists

b.A monopoly faces high barriers to entry

c.Consumers will bid down marginal revenue in monopolistic markets

d.A monopoly must lower price on all units to sell an additional unit

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Answer #1

Ans - The marginal revenue curve is downward sloping for monopolist because -

d. A monopoly must lower price on all units to sell an additional unit.

Monopolist is the only seller in the market for a particular product and to increase his sales he has to reduce the price of each additional unit sold. Unlike in perfect competition the price cannot be fixed to get identical AR and MR curve. Monopolist faces a downward sloping market demand curve satisfying the law of demand and hence marginal curve is downward sloping.

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