To Induce an Increase in the Quantity Demanded of Its

question 57

Multiple Choice

To induce an increase in the quantity demanded of its product, a monopolist must reduce the

• A) quality of its product and thereby generate a downward shift its ATC curve.
• B) price of its product and thereby generate a rightward shift in its demand curve.
• C) price of its product and thereby generate a rightward movement along its demand curve.
• D) quality of its product and thereby generate a downward movement along its ATC curve.

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Definitions:

Average Total Cost

A firm’s total cost divided by output (the quantity of product produced); equal to average fixed cost plus average variable cost.

Economies of Scale

Cost advantages that a business obtains due to expansion, leading to a reduction in the average cost per unit through increased production.

Diseconomies of Scale

The situation in which a business grows to a point where the costs per unit increase, opposed to saving costs, often due to managerial inefficiencies or complexity.

Constant Returns to Scale

A situation in which increasing the amount of all inputs used in production by a certain factor results in output increasing by the same factor.