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The necessity for a monopoly to lower its price in order to sell more units of its product explains why: A
The necessity for a monopoly to lower its price in order to sell more units of its product explains why:
A. monopolies are common among public utilities.
B. the marginal revenue curve is below the demand curve for a monopoly.
C. the marginal cost curve for a monopoly slopes upward.
D. monopolies are able to maintain market power.
E. monopolies differ from monopolistically competitive firms.
Expert Solution
If the monopolist wants to sell one extra unit of his output, he has to reduce the price not only of the last unit but also of the units earlier sold which could have been sold at higher prices. Hence, the marginal revenue is less than the price charged.
Therefore, the correct option is (B) the marginal revenue curve is below the demand curve for a monopoly.
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