The relationship between the marginal revenue (MR) and the average revenue(AR) of a monopolist is that the marginal revenue curve____
Answer Details
The relationship between the marginal revenue (MR) and the average revenue (AR) of a monopolist can be described as follows:
The MR curve slopes down to the right and is below the AR curve. This means that as a monopolist increases the quantity of goods sold, the marginal revenue (the extra revenue earned from selling one more unit) decreases, while the average revenue (the total revenue divided by the number of goods sold) also decreases, but at a slower rate.
The reason for this is that, in a monopoly, the monopolist has the market power to set the price for their goods, so as they sell more, they may have to lower the price to entice more customers to buy. This leads to a decrease in the marginal revenue earned from each additional unit sold, and a decrease in the average revenue earned from all units sold.
In simple terms, as a monopolist sells more goods, they will earn less from each additional unit they sell, causing both the marginal and average revenue to decrease, but the MR will decrease faster than the AR.