Micro Unit 4, Question 1- Monopoly Demand and MR

The video tutorial explains the relationship between demand and marginal revenue in both perfect competition and monopoly markets. In perfect competition, firms are price takers, and the price equals marginal revenue. However, in a monopoly, the firm is a price maker, and the relationship between demand and marginal revenue differs. The video illustrates how monopolies cannot price discriminate and must lower prices to sell additional units, resulting in marginal revenue being less than the price. This concept is crucial for understanding monopolies, monopolistic competition, and oligopolies.

In a perfectly competitive market, what is the relationship between price and marginal revenue?

• Price equals marginal revenue

• Price is less than marginal revenue

• Price is unrelated to marginal revenue

• Price is greater than marginal revenue

How does a monopoly differ from a perfectly competitive firm in terms of pricing?

• A monopoly is a price taker

• A monopoly can set any price it wants

• A monopoly must follow market prices

• A monopoly has no control over prices

What happens to marginal revenue when a non-price discriminating monopoly lowers its price to sell more units?

• Marginal revenue becomes negative

• Marginal revenue decreases

• Marginal revenue remains the same

• Marginal revenue increases

Why can't a non-price discriminating monopoly charge different prices to different customers?

• It is against market rules

• It is illegal to do so

• It is called price discrimination

• It is not profitable

What must a monopoly do to increase the number of units sold?

• Offer discounts selectively

• Increase the price

• Keep the price constant

• Lower the price