Other things being equal, the marginal revenue product (MRP) curve for a competitive seller:4) A) is identical to the MRP curve for a monopolist. B) lies above the MRP curve for a monopolist. C) is upward sloping whereas a monopolist has a downward sloping MRP curve. D) lies below the MRP curve for a monopolist.

Question

Patricia

Business

9 February, 18:28

Other things being equal, the marginal revenue product (MRP) curve for a competitive seller:4) A) is identical to the MRP curve for a monopolist. B) lies above the MRP curve for a monopolist. C) is upward sloping whereas a monopolist has a downward sloping MRP curve. D) lies below the MRP curve for a monopolist.

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Answers (1)

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Brock Castillo · Answer 1

The correct answer is B) lies above MRP curve for a monopolist.

Explanation:

Marginal revenue is the increase in total revenue when one more unit of product is sold. Since this unit is sold at the market price, for a company in free competition the marginal revenue is equal to the price.

It can be kept constant, but it is normal for it to follow the law of diminishing returns and the more units produced, the lower the marginal revenue. It will be profitable for a firm to produce more units even though marginal revenue is decreasing until it equals marginal cost. Marginal revenue is calculated by dividing the change in total revenue by the number of additional units.