When is the marginal revenue from making a sale less than the price of the product?
- When is the marginal revenue from making a sale less than the price of the product?
Homework Answers
Marginal revenue is less than price of the product when the demand curve is downward sloping. E.g consider the case of monopoly or monopolistic competitive firm.
A monopolist faces a downward sloping demand curve. In order to sell one additional unit of good it has to reduce its price for all the units that it is selling (even for the previous units sold) and therefore marginal revenue stays less than price of the product.
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