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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Why is a monopolist's marginal revenue less than the price of its good? Can marginal revenue ever be negative? Explain.

To determine
The reason why marginal revenue is less than the price.

Explanation

Under monopoly condition, the marginal revenue is always lesser than the price of its output due to market demand curve. As there is an increase in the sales in market, monopolist firms must decrease its price for the unit of goods sold. This decrease in price forgoes major portion of additional revenue spent on the sale of a unit...

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