The marginal revenue curve faced by a perfectly competitive firm

Posted By Admin @ September 03, 2022

Question:

Explain why the marginal revenue curve facing a competitive firm differs from the marginal revenue curve facing a monopolist. unlike for perfectly competitive? firms, whose marginal revenue curves are the same as their individual demand? curves, a? monopolist's marginal revenue curve differs from its demand curve because

Answer:

The correct answer to this question is that:

In a monopoly, “the monopolist must lower the price on all units to sell one more unit of output”.

This means that in a monopoly market, if we increase the amount of output without lowering the price, the marginal revenue decreases. Therefore marginal revenue is indirectly proportional to number of outputs.

In a perfect competition however, the marginal revenue is constant to any amount of output.

 

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