Figure 15-14
-Refer to Figure 15-14. If the monopoly operates at an output level less than Q0, then an increase in output toward (but not exceeding) Q0 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.

Question

Figure 15-14 
-Refer to Figure 15-14. If the monopoly operates at an output level less than Q0, then an increase in output toward (but not exceeding) Q0 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.

Quizplus · Accepted Answer

If the monopoly operates at an output level less than Q0, then an increase in output toward Q0 would generate a surplus (the area between the demand curve and the marginal cost curve) for the society that was previously unrealized, resulting in an increase in total surplus. However, because the monopoly is initially producing less than the efficient level of output, the price is higher than it would be at the efficient level. An increase in output would lower the price, making the product more affordable and accessible for consumers. Therefore, raising the output level toward Q0 would lower the price and raise total surplus.

Figure 15-14 -Refer to Figure 15-14. If the Monopoly Operates at an Operates