Which of the following statements is true?

• A. A monopolist's demand curve is more elastic than the market demand curve.
• B. For a monopoly, an increase in the quantity sold will always increase total revenue.
• C. The barriers to market entry in perfect competition are similar to those for a monopoly.
• D. A monopoly's marginal revenue is less than its average revenue.

Answer: (D)

Verified step by step guidance

1. Understand the characteristics of a monopoly: A monopoly is a market structure where a single firm is the sole producer of a product with no close substitutes, and there are high barriers to entry.
2. Review the relationship between demand and revenue in a monopoly: A monopolist faces a downward-sloping demand curve, meaning it must lower the price to sell additional units, which affects its revenue.
3. Differentiate between marginal revenue (MR) and average revenue (AR): In a monopoly, the marginal revenue is the additional revenue from selling one more unit, while average revenue is the revenue per unit sold, which is the same as the price.
4. Analyze why MR is less than AR for a monopolist: Since the monopolist must lower the price to sell more units, the marginal revenue from selling an additional unit is less than the price of that unit, making MR less than AR.
5. Conclude with the correct statement: Given the characteristics of a monopoly, the statement 'A monopoly's marginal revenue is less than its average revenue' is true, as it reflects the relationship between price, demand, and revenue in a monopolistic market.