ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The marginal revenue lies below the demand curve because the monopoly is a price-maker. To sell additional units of their product, the monopoly has to lower the price to earn profits in the market. If they do not lower the price, the demand for products will fall which will make them incur a loss.

Detailed explanation-2: -The marginal revenue curve lies below the demand curve, and it bisects any horizontal line drawn from the vertical axis to the demand curve. At a price of $6, for example, the quantity demanded is 4. The marginal revenue curve passes through 2 units at this price.

Detailed explanation-3: -A monopolist’s marginal revenue is less than the price of its product because: (1) its demand curve is the market demand curve, so (2) to increase the amount sold, the monopolist must lower the price of its good for every unit it sells. (3) This cut in prices reduces revenue on the units it was already selling.

Detailed explanation-4: -The marginal revenue for a monopolist is the private gain of selling an additional unit of output. The marginal revenue curve is downward sloping and below the demand curve and the additional gain from increasing the quantity sold is lower than the chosen market price.