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Marginal revenue is less than price for a monopolist because in a monopoly market, the monopolist is the sole seller and has the power to set the price. To sell more units, the monopolist must lower the price, which reduces the revenue gained from each additional unit sold. This results in marginal revenue being less than the price.
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What is the marginal revenue of a monopolist is?
The marginal revenue of a monopolist is the additional revenue generated from selling one more unit of a good or service. Unlike in perfect competition, a monopolist faces a downward-sloping demand curve, which means that to sell more units, it must lower the price on all units sold. As a result, marginal revenue is less than the price at which the additional unit is sold. This relationship is key to understanding a monopolist's pricing and output decisions.
What is the relationship between price and marginal revenue when a monopolist cuts the price to sell more?
Between them exist a simple line of difference, a monopolist can sale more with less money CHACHA!
Why does marginal revenue curve lie below the Demand curve?
Since Marginal revenue refers to the additional revenue earned by a monopolist by increasing the sale by 1 unit ( usually through lowering the price ), the additional revenue earned will always be less since there has been a drop in price.
What is monopolist's marginal revenues less than the price of its goods?
because the monopolist firms are price maker and they can set any price they want and the customers are not perfect knowleged
In a monopoly why is the marginal revenue curve always below the demand curve?
because price and output are related by the demand function in a monopoly. it is the same thing to choose optimal price or to choose the optimal output. even though the monopolist is assumed to set price and consumers choose quantity as a function of price, we can think of the monopolist as choosing the optimal quantity it wants consumers to buy and then setting the corresponding price. OR in simpler terms Because AR (demand) is downward sloping - (see equi-marginal rule or Law of Equi-Marginal Utility). To sell one more unit of output, the firm must lower its price, meaning that the revenue received is less than that received for the previous unit (marginal revenue received for unit 2 is less than that for unit 1). Therefor the marginal revenue will be less than the average revenue. Unit 1 sold for $5 Marginal revenue=$5 Average Revenue=$5 Unit 2 sold for $4 Marginal revenue=$4 Average Revenue=$4.50 ($5+$4/2)
What is the marginal revenue of a monopolist is?
The marginal revenue of a monopolist is the additional revenue generated from selling one more unit of a good or service. Unlike in perfect competition, a monopolist faces a downward-sloping demand curve, which means that to sell more units, it must lower the price on all units sold. As a result, marginal revenue is less than the price at which the additional unit is sold. This relationship is key to understanding a monopolist's pricing and output decisions.
What is the relationship between price and marginal revenue when a monopolist cuts the price to sell more?
Between them exist a simple line of difference, a monopolist can sale more with less money CHACHA!
Are marginal revenue average revenue and price are all equal for a monopolist?
No, in a monopolistic market, marginal revenue is less than average revenue and price. This is because the monopolist must lower the price in order to sell more units, leading to a decline in revenue per unit.
Why does marginal revenue curve lie below the Demand curve?
Since Marginal revenue refers to the additional revenue earned by a monopolist by increasing the sale by 1 unit ( usually through lowering the price ), the additional revenue earned will always be less since there has been a drop in price.
What is monopolist's marginal revenues less than the price of its goods?
because the monopolist firms are price maker and they can set any price they want and the customers are not perfect knowleged
In a monopoly why is the marginal revenue curve always below the demand curve?
because price and output are related by the demand function in a monopoly. it is the same thing to choose optimal price or to choose the optimal output. even though the monopolist is assumed to set price and consumers choose quantity as a function of price, we can think of the monopolist as choosing the optimal quantity it wants consumers to buy and then setting the corresponding price. OR in simpler terms Because AR (demand) is downward sloping - (see equi-marginal rule or Law of Equi-Marginal Utility). To sell one more unit of output, the firm must lower its price, meaning that the revenue received is less than that received for the previous unit (marginal revenue received for unit 2 is less than that for unit 1). Therefor the marginal revenue will be less than the average revenue. Unit 1 sold for $5 Marginal revenue=$5 Average Revenue=$5 Unit 2 sold for $4 Marginal revenue=$4 Average Revenue=$4.50 ($5+$4/2)
Is marginal revenue equal to price in economics?
In economics, marginal revenue is not always equal to price. Marginal revenue is the additional revenue gained from selling one more unit of a product, while price is the amount customers pay for that product. In competitive markets, where firms are price takers, marginal revenue is equal to price. However, in markets with market power, such as monopolies, marginal revenue is less than price.
Does monopoly have a supply function?
In a monopoly, there is no traditional supply function as seen in competitive markets. A monopolist sets the quantity of output to maximize profit by equating marginal cost with marginal revenue, rather than responding to market supply and demand. The monopolist determines the price based on the demand curve for its product, which means the relationship between quantity supplied and price is not direct or linear, making the concept of a supply function less applicable.
Marginal revenue curve?
Explain why the marginal revenue(MR) is always less than the average revenue (AR)?
How does a monopolist decide how much product to make?
A monopolist decides how much product to produce by determining the profit-maximizing output level, where marginal cost (MC) equals marginal revenue (MR). Unlike firms in competitive markets, a monopolist faces a downward-sloping demand curve, meaning it can influence the market price by adjusting production levels. The monopolist will produce less than the socially optimal quantity, leading to higher prices and reduced consumer surplus compared to competitive markets. Ultimately, the goal is to maximize economic profit rather than total output.
What is the relationship in price and marginal revenue for price setters?
The marginal revenue of selling an additional unit of output for a price setter (hence within an imperfect market) is always less than market price. Picture a downwards sloping market demand curve (hence individual monopolies demand curve); at P=6, Q=2, and at P=5, Q=3. To sell an additional unit of output, the firm must drop price from 6 to 5, meaning the total revenue will increase from (6x2)=12 to (5x3)=15. This increase in revenue (marginal revenue) is $3. Note $3 is not only smaller than the original price, but than the new price as well. Hence, price is always greater than marginal revenue for a price setter.
What is The additional income from selling one more unit of a good sometimes equal to price is?
The additional income from selling one more unit of a good is called marginal revenue. In a perfectly competitive market, the marginal revenue is equal to the price of the good since firms are price takers and can sell any quantity at the market price. However, in monopolistic or imperfectly competitive markets, marginal revenue is generally less than the price due to the downward-sloping demand curve, which requires lowering the price to sell additional units.
