The correct answer is: B. AR < MR
In a monopoly market, the monopolist is the only seller of a good or service. This means that the monopolist has a great deal of market power and can set the price of its product. The monopolist’s demand curve is downward-sloping, which means that the monopolist can charge a higher price for its product if it sells less of it.
The monopolist’s marginal revenue curve is always below its demand curve. This is because the monopolist must lower its price to sell more units of its product. For example, if the monopolist is currently selling 10 units of its product at a price of $10 per unit, it can sell 11 units of its product at a price of $9.99 per unit. However, the monopolist’s revenue from selling 11 units of its product will be $99.99, which is less than the revenue it received from selling 10 units of its product at a price of $100.
In conclusion, in a monopoly market, the monopolist’s average revenue curve is always below its marginal revenue curve. This is because the monopolist must lower its price to sell more units of its product, which results in a decrease in its average revenue.
Here is a more detailed explanation of each option:
- A. AR = MR. This is not the case in a monopoly market. As explained above, the monopolist’s average revenue curve is always below its marginal revenue curve.
- B. AR < MR. This is the correct answer. As explained above, the monopolist’s average revenue curve is always below its marginal revenue curve.
- C. AR > MR. This is not the case in a monopoly market. As explained above, the monopolist’s average revenue curve is always below its marginal revenue curve.
- D. None of the above. This is not the correct answer. As explained above, the correct answer is B. AR < MR.