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WAEC Economics 2021 Question 21

Question 21

Market Structures

The relationship between the marginal revenue (MR) and the average revenue (AR) of a monopolist is that the marginal revenue curve

  1. A.is above the average revenue curve.
  2. B.slopes down to the right and is below the AR curve.
  3. C.and the AR curve are downward sloping and are identical
  4. D.is vertical while the average revenue curve is horizontal.
Show the answer and explanation

Answer: B (slopes down to the right and is below the AR curve.)

Explanation

A monopolist must cut price to sell more, so MR falls faster and lies below AR.