Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

12. Monopoly

Monopoly Profit on the Graph

Microeconomics

12. Monopoly

Monopoly Profit on the Graph

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Multiple Choice

The MR curve lies below the demand curve in this figure because the:

Demand curve is linear

Demand curve is highly inelastic throughout its full length

Demand curve is highly elastic throughout its full length

Gain in revenue from an extra unit of output is less than the price charged for that unit

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Verified step by step guidance

Understand that the MR (Marginal Revenue) curve represents the additional revenue gained from selling one more unit of a good.

Recognize that the demand curve (D) shows the relationship between the price of a good and the quantity demanded by consumers.

Note that in a monopolistic market, the MR curve lies below the demand curve because the firm must lower the price of all units sold to sell an additional unit, which reduces the marginal revenue.

The reason the MR curve is below the demand curve is that the gain in revenue from selling an extra unit is less than the price charged for that unit, due to the price reduction needed to sell more units.

This phenomenon occurs because the demand curve is downward sloping, indicating that the firm has some market power to set prices above marginal cost, but must reduce prices to increase sales.