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Which of the following statements regarding a monopolist is true? (Assume a linear market demand.)

A. A monopoly's total revenue is maximized when the price elasticity of demand is elastic.
B. The monopolist cannot control the price.
C. The marginal revenue curve lies below the market demand curve.
D. The demand curve that the monopolist faces is perfectly elastic.

asked
User Sniver
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8.1k points

1 Answer

7 votes

Final answer:

The true statement about a monopolist is that the marginal revenue curve lies below the market demand curve, meaning the monopolist's marginal revenue is always less than the price.

Step-by-step explanation:

The statement regarding a monopolist that is true is C. The marginal revenue curve lies below the market demand curve. This is because a monopolist's marginal revenue is less than the price of the good due to the downward-sloping market demand curve that the monopolist faces. When a monopolist sells an additional unit, it must lower the price not only on the additional unit but also on all previous units sold. Thus, the marginal revenue from selling an additional unit is less than the price at which the unit is sold. In contrast, A is incorrect because total revenue is maximized when the price elasticity of demand is unitary, not just elastic. B is false since a monopolist can indeed control the price within the constraints of the demand for its product. D is incorrect as the demand curve that a monopolist faces is not perfectly elastic but downward-sloping, indicating that the quantity sold can increase only by decreasing the price.

answered
User Cozy
by
7.5k points
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