The Figure Below Illustrates the Cost and Revenue Structure for a Monopoly

question 28

Multiple Choice

The figure below illustrates the cost and revenue structure for a monopoly firm.
Figure 11-17

Refer to Figure 11-17. If the monopoly firm is currently producing Q₃ units of output, then a decrease in output will necessarily cause profit to

• A) remain unchanged.
• B) decrease.
• C) increase as long as the new level of output is at least Q₂.
• D) increase as long as the new level of output is at least Q₁.

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Definitions:

Price

The expenditure needed to secure a product, service, or piece of property.

Price-discriminating Monopolist

A monopolist that sells the same product at different prices to different groups of consumers, usually to maximize profits by capturing consumer surplus.

Market

A place or mechanism through which buyers and sellers interact to trade goods, services, or assets, facilitating the determination of prices and the exchange of ownership.

Price Elasticity

An indicator of the sensitivity of consumer demand for a product to variations in its price, reflecting how significantly the amount of the product consumers want to buy alters with price adjustments.