Why Is Marginal Revenue Always Less Than Price for a Monopolist

question 32

Essay

Why is marginal revenue always less than price for a monopolist? Construct an example to illustrate your answer.

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Definitions:

Sales Volume

This refers to the total number of units of a product or service sold over a specific period.

Account Analysis

A method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst’s prior knowledge of how the cost in the account behaves.

Mixed Cost

An expense that contains both fixed and variable components, changing in total with the level of activity though containing a constant element.

Fixed Cost

Expenses that do not change in total with changes in the level of output or activity within a certain range.