When a monopolist reduces the quantity of output it produces and sells, the
A)price of its output increases.
B)price of its output remains constant.
C)price of its output decreases.
D)profits for the firm always decrease.

Question

Quizplus · Accepted Answer

When a monopolist reduces the quantity of output it produces and sells, the market becomes tighter with a lower supply of goods, leading to an increase in the price of its output. This is because the demand for the product remains constant or may even increase due to a lack of substitute products. As a result, the monopolist can earn higher profits by selling a lower quantity of output at a higher price.

When a Monopolist Reduces the Quantity of Output It Produces