Discuss and explain the relationships between the monopolist's demand curve, average revenue curve, and marginal revenue curve
What will be an ideal response?
The monopolist's demand curve is the industry demand curve, and it is downward sloping. Total revenue is PQ, so average revenue is PQ/Q = P. Thus, the average revenue curve is the demand curve. The marginal revenue curve lies below the demand curve. If a firm sells another unit, it receives the price for the unit. But, it must reduce price to make the sale, and hence must lower price on other units it could have sold at a higher price. Consequently, the extra revenue earned from selling an extra unit is less than the price.
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A change in the price of a good
A) shifts the good's demand curve and also causes a movement along it. B) shifts the good's demand curve but does not cause a movement along it. C) does not shift the good's demand curve but does cause a movement along it. D) neither shifts the good's demand curve nor causes a movement along it.
The dominant school of economic thought from the 1930s into the 1960s was __________.
Fill in the blank(s) with the appropriate word(s).