The MR curve of a perfectly competitive firm is horizontal. The MR curve of a monopoly firm is:
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The MR curve of a perfectly competitive firm is horizontal. The MR curve of a monopoly firm is: LO12.3 a. horizontal, too. b. upward sloping. c. downward sloping. d. it depends. |

Here is the full solution including the answer and explanation.
Explanation
c is correct
A monopolist is a price maker so its marginal revenue curve is downward sloping due to the fact that it has to reduce its price in order to sell extra units of its commodity. Since the monopolist has to reduce its price not only on the additional units but also on the previous units, this increases the total revenue but at a declining rate. Thus, graphically, the MR curve is declining with each extra unit of output.
a is incorrect
The marginal revenue curve is horizontal only for competitive firms because it does not have to reduce its price to sell extra units of a commodity, it can sell any amount of commodity at the prevailing market price. However, a monopolist cannot sell all that it wishes to sell at a single price. In order to increase the quantity of commodity, it has to reduce its price.
b is incorrect
An upward sloping marginal revenue means an increase in price would increase the units of a commodity sold and an increase in revenue, which is not the case in reality. It also violates the law of demand.
d is incorrect
It does not depend at all. The marginal revenue of a monopolist is always downward sloping and its slope is half the slope of the demand curve.
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