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

Question

Quizplus · Accepted Answer

When a monopolist increases the number of units it sells, it experiences two effects on revenue: the output effect and the price effect. The output effect is that by selling more units, the monopolist increases total revenue. The price effect is that by selling more units, the monopoly exerts downward pressure on the price, thereby reducing total revenue per unit sold. The net effect on revenue is the combination of these two effects.

When a Monopolist Increases the Number of Units It Sells