When a monopoly increases its output and sales,
A)both the output effect and the price effect work to increase total revenue.
B)the output effect works to increase total revenue, and the price effect works to decrease total revenue.
C)the output effect works to decrease total revenue, and the price effect works to increase total revenue.
D)both the output effect and the price effect work to decrease total revenue.

Question

Quizplus · Accepted Answer

When a monopoly increases its output, the output effect increases total revenue because more units are sold. However, the price effect decreases total revenue because the price must be lowered to sell additional units.

When a Monopoly Increases Its Output and Sales