When a monopolist increases the number of units it sells, there are two effects on revenue. They are the
A)demand effect and the supply effect.
B)competition effect and the cost effect.
C)competitive effect and the monopoly effect.
D)output effect and the price effect.

Question

Quizplus · Accepted Answer

When a monopolist increases the number of units it sells, the revenue change is a result of two effects: 
1) Output effect: selling more units increases revenue as more units are sold 
2) Price effect: as the monopolist increases output, the price it can charge for each unit decreases, leading to a decrease in revenue per unit.

These effects result in a total revenue change that depends on the relative magnitude of each effect.

When a Monopolist Increases the Number of Units It Sells