If a Monopolist Is Producing a Level of Output Where

question 15

Multiple Choice

If a monopolist is producing a level of output where MR is less than MC,then it should

• A)Shift its marginal cost curve upward.
• B)Increase its output.
• C)Lower its output.
• D)Lower its price.

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Definitions:

Substitution Effect

The shift in consumer behavior toward different products as a result of changes in their relative costs, prompting the replacement of one item with another.

Output Effect

The impact on the economy when production increases, leading to a higher real GDP and potentially affecting employment and price levels.

Total Revenue Product

Total Revenue Product is the total revenue generated by a firm from selling its output, which is a key concept in understanding a firm's profitability.

Perfect Competitor

A perfect competitor operates in a market where no single buyer or seller has the power to influence prices, and where information, resources, and products are freely and openly available to all.