Because the monopolist is a single seller, it faces the market demand curve for the product produced. This demand curve is negatively sloped and shows that the monopolist can sell more output only by lowering the price of the product. This means that the output the monopolist chooses to sell affects price. B. Marginal Revenue 1.
Marginal revenue is the change in total revenue associated with selling one more unit of output.
It is the private benefit to the monopolist of selling one more unit. For a monopolist, marginal revenue is less than price. Because the monopolist must lower the price on all units in order to sell additional units, marginal revenue is less than price. Because marginal revenue is less than price, the marginal revenue curve will lie below the demand curve. Because demand represents marginal social benefit and marginal revenue represents marginal private benefit, marginal social benefit is greater than industry marginal private benefit in monopoly.