Suppose That Product X Is Sold by a Monopolist Who

question 33

Multiple Choice

Suppose that product X is sold by a monopolist who has constant marginal cost for producing X. Further suppose that there is an exogenous shock to the product X market, resulting in an increase in demand for X and a resulting rightward shift in marginal revenue. Which of the following statements is correct regarding the equilibrium price and quantity of X?

• A)Both price and quantity will rise.
• B)Both price and quantity will fall.
• C)Price will rise; the effect on quantity is uncertain.
• D)Quantity will rise; the effect on price is uncertain.

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Definitions:

Quantity

The measure or number of units of a particular material or immaterial entity.

Conjunctive

Pertaining to conditions or tasks that require collective effort and cooperation, where the group's success is limited by its least capable member.

Disjunctive

Refers to a situation or task requiring a solution that can come from any single group member who possesses the necessary knowledge, solving the problem more efficiently than others.

Compensatory

Compensatory refers to something designed to counterbalance or make up for a deficiency or lack.