Asked by Garrett Brown on May 05, 2024
Verified
When a monopolist increases the quantity that it sells, price decreases, which, all else equal, decreases total revenue; this is called the price effect.
Price Effect
The price effect is an economic term describing the impact of a change in a product’s price on its demand and supply.
Total Revenue
The total receipts a company receives from sales of goods or services before any expenses are subtracted.
- Decode the effect of monopolistic production strategies on the maximization of both revenue and profits.
Verified Answer
MH
Malina HernandezMay 08, 2024
Final Answer :
True
Explanation :
When a monopolist increases the quantity sold, it must lower the price to sell additional units, leading to a decrease in total revenue per unit sold due to the price effect. This effect occurs because, in a monopoly, the firm faces a downward-sloping demand curve, meaning it can only sell more by reducing the price.
Learning Objectives
- Decode the effect of monopolistic production strategies on the maximization of both revenue and profits.