Where does the marginal revenue curve lie on a monopoly diagram?

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BlackTom AI · Accepted Answer

When analyzing where the marginal revenue (MR) curve lies on a monopoly diagram, it helps to recall how MR relates to the demand curve. 
Option a: 'To the right of the demand curve' would imply MR is horizontally displaced from the demand curve, which is not how MR behaves in relation to price and quantity in a monopoly. The MR curve is not simply a shifted position to the side of the demand curve. 
Option b: 'Above the average cost curve' confuses the MR curve with cost curves. MR reflects revenue changes from selling one more unit, not a relation to average cost. In a typical monopoly diagram, MR and the average cost curve are distinct concepts; MR need not sit above AC. 
Option c: 'Below the demand curve' is characteristic of a monopoly because the firm faces a downward-sloping demand curve, and the additional revenue from selling one more unit (MR) drops faster than price due to the need to lower the price on all units sold. This makes the MR curve lie below the demand curve at every quantity. 
Option d: 'Above the demand curve' would contradict the standard relationship between MR and price in monopoly pricing, since MR is derived from the total revenue function and generally lies below the demand curve, not above it. It would imply higher marginal revenue than the price, which does not occur in the typical downward-sloping demand setting. 
In summary, the key concept is that monopolists face a downward-sloping demand, and the marginal revenue from selling an extra unit is less than the price, placing MR below the demand curve on the diagram.

MUF0061 Economics Unit 1 - Semester 2, 2025 Revision: Monopoly - Video and Quiz (10 - 15 minutes) (COULD COMPLETE AS PRE-CLASS, PRIOR TO 2ND LESSON FOR THIS TOPIC)

Where does the marginal revenue curve lie on a monopoly diagram?

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