What happens to total revenue at the moment the monopolist cuts the price to sell an additional unit?

In the context of a monopolist operating in a market, the relationship between price, quantity sold, and total revenue is crucial to understanding the implications of a price change. When a monopolist decides to cut the price to sell an additional unit, two effects come into play.

First, the monopolist receives a lower price on the additional unit sold. This would suggest that the total revenue could decrease, as the revenue from this additional unit is gained at a lower price than before.

Second, while selling that additional unit at a reduced price may seem to add to total revenue, this price cut also affects the revenue received from all previously sold units, as the monopolist must lower the price for all units sold to attract buyers for the additional unit. This leads to a decrease in revenue from every unit sold.

The combined effect of these two factors generally results in an overall decrease in total revenue when the price is reduced for the purpose of selling one more unit. As such, it illustrates how a monopolist must be cautious when adjusting prices, as price reductions can often lead to decreased total revenue, especially when operating within the elastic portion of the demand curve.

Therefore, cutting the price results in a net decrease in total revenue, justifying the selection