Graph 15-4 This Graph Depicts the Demand and Marginal-Cost

question 185

Multiple Choice

Graph 15-4 This graph depicts the demand and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s) .
-Refer to Graph 15-4.If the monopoly operates at an output level below q₀, decreasing output would:

• A)raise the price and raise total surplus
• B)lower the price and raise total surplus
• C)raise the price and lower total surplus
• D)lower the price and lower total surplus

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Definitions:

Long-Run Average Total Cost

The average cost per unit of output in the long term when all inputs can be varied by the firm and economies of scale have been reached.

Output

The total amount of goods or services produced by a company, industry, or economy within a given period.

Returns to Scale

The rate at which output increases in response to a proportional increase in all inputs (factors of production).

Long-Run Average Total Cost Curve

A graphical representation showing the lowest possible average cost of production, allowing all factors of production to vary in order to minimize cost.