Question

In order to improve your chances of matching with someone, you decide to update your online dating profile. Specifically, you decide that to impress potential partners you will show off what you know about monopolies and marginal revenue. Draft out an explanation as to what marginal revenue is for the monopolist so that you can have them all wanting to swipe right!

Answer 1

Answer:

A Monopolist has a downward sloping Demand curve which means that they will sell more goods if they charge lower prices.

Now Marginal Revenue is the change in the additional revenue that a company gets when it sells an extra unit. For this reason, the Marginal Revenue of a Monopoly is downward sloping as well because if the monopoly has to reduce their price to sell an additional unit, the additional unit will bring in less than the last unit.

The Marginal Revenue curve for a Monopoly is below the Demand Curve which gives them the opportunity to make an economic profit.  

The point where the Marginal Revenue is equal to the Marginal Cost is the quantity where the Monopoly can maximise their profits as producing past this level will cost more than they are gaining per additional unit.