Concept:A monopolist faces a downward-sloping demand curve, with its marginal revenue curve below it.
Explanation:In a monopoly, the firm is the sole seller, so the demand curve it faces is the market demand curve, written as
D=AR.
This demand curve slopes downward from left to right, showing that more units can be sold only at lower prices.
Because price must be reduced to sell extra units, the marginal revenue curve
MR also slopes downward and lies below the demand curve.
The diagram shows this relationship between
AR and
MR.
In perfect competition, by contrast, the demand curve is horizontal because the firm is a price taker.
A competitive market also has many sellers and no single firm can control price.
Since the diagram displays a downward-sloping demand curve with
MR below it, it represents a monopoly.
Answer:Monopoly (Option B).
