If a Monopoly Is Producing an Amount of Output Level

question 60

Multiple Choice

If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will ________ its price and ________ its output.

• A) raise; decrease
• B) lower; increase
• C) lower; decrease
• D) raise; increase

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Definitions:

Linear Demand Curve

A graphical representation showing a straight-line relationship between the price of a good and the quantity demanded.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of demand to price changes.

Elastic

A description of a good's demand or supply that indicates a high sensitivity to changes in price, where a small change in price leads to a larger change in quantity demanded or supplied.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with elasticity greater or less than one indicating the degree of responsiveness.