Concept:A monopolist faces a downward-sloping demand curve, which is the same as the average revenue (
AR) curve, and the marginal revenue (
MR) curve lies below it.
Explanation:In a monopoly, to sell an additional unit, the firm must lower the price on all units sold.
As a result, the extra revenue gained from selling one more unit,
MR, is always less than the price, which equals
AR.
Therefore, the
MR curve falls downward to the right and remains below the
AR curve at every level of output.
This happens because the loss in revenue from lowering the price on earlier units pulls
MR further down than
AR.
Answer:B. slopes down to the right and is below the
AR curve.