If a Monopoly Discovers That the Demand for Its Output

question 26

Multiple Choice

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

• A) producing more and setting a higher price.
• B) setting a lower price.
• C) setting a higher price.
• D) producing more while leaving price unchanged.

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Definitions:

Average Total Cost Curve

A graphical representation showing how the average total cost of production changes as the quantity of output changes.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, allowing firms to make adjustments and leading to a situation where economic profit equals zero.

Just Tangent To

A condition where two curves meet at only one point without intersecting, often used in the context of optimizing problems.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing to buy at each price.