Question

How are Average Revenue (AR) and Marginal Revenue (MR) curves related under monopoly?

Options

• Both are horizontal and overlap

• AR slopes downward and MR lies below AR

• MR is vertical and AR is horizontal

• Both are U-shaped

Answer 1

AR slopes downward and MR lies below AR

Explanation:

To sell extra units, the monopolist must reduce price, so AR falls with output and MR falls faster, remaining below AR.