In a monopoly market, how does the marginal revenue curve relate to the demand curve?

Multiple choice question for Monopoly. Select an option, then review the explanation below.

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It coincides exactly with the demand curveIt runs parallel to the demand curveIt is positioned below and approaches the demand curveIt lies beneath and moves away from the demand curve

Explanation

In a monopolistic market, the marginal revenue curve always lies below the demand curve and diverges from it because the monopolist must lower the price to sell additional units, causing marginal revenue to decrease faster than price.

Practice related questions from the same subject.

1.Which option best describes the concept of price discrimination?
2.In contrast to a perfectly competitive market, what is a monopolist more inclined to do?
3.In a pure monopoly market, how does the price compare to the marginal revenue?
4.What action should a monopolist take when marginal revenue is greater than marginal cost?
5.What is the likely impact on production costs if a natural monopoly is divided into several smaller companies by regulators?

In a monopoly market, how does the marginal revenue curve relate to the demand curve?

Explanation

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