[amp_mcq option1=”AR = MR” option2=”AR > MR” option3=”AR < MR\" option4=\"AR = MR = 0\" correct=\"option1\"]<\/p>\n
The correct answer is A. AR = MR.<\/p>\n
In a monopoly, the firm is the only seller of a good or service in the market. This means that it has a great deal of market power and can set the price of its product. The firm’s demand curve is therefore downward-sloping, and its marginal revenue curve lies below its demand curve. This is because the firm must lower its price to sell more units, and it will therefore earn less revenue on each additional unit sold.<\/p>\n
The equation AR = MR is the condition for profit maximization in a monopoly. This means that the firm will maximize its profits by producing the quantity of output at which marginal revenue equals marginal cost.<\/p>\n
The equation AR > MR is not correct in the case of monopoly. This is because the firm’s marginal revenue curve lies below its demand curve. Therefore, the firm’s average revenue must also be less than its marginal revenue.<\/p>\n
The equation AR < MR is also not correct in the case of monopoly. This is because the firm’s marginal revenue curve is always positive. Therefore, the firm’s average revenue must also be positive.<\/p>\n
The equation AR = MR = 0 is not correct in the case of monopoly. This is because the firm’s marginal revenue curve is always positive. Therefore, the firm’s average revenue must also be positive.<\/p>\n","protected":false},"excerpt":{"rendered":"
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