When a monopoly increases its output and sales, Question 23 options: a) the output effect works to increase total revenue, and the price effect works to decrease total revenue. b) both the output effect and the price effect work to increase total revenue. c) both the output effect and the price effect work to decrease total revenue. d) the output effect works to decrease total revenue, and the price effect works to increase total revenue.

When a monopoly increases its output and sales, Question 23 options: a) the output effect works to increase total revenue, and the price effect works to decrease total revenue. b) both the output effect and the price effect work to increase total revenue. c) both the output effect and the price effect work to decrease total revenue. d) the output effect works to decrease total revenue, and the price effect works to increase total revenue.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Monopoly

Section: Chapter Questions

Problem 2.3P

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Suppose the market for Hula Hoops is monopolized by a single firm. a. Draw the initial equilibrium for such a market. b. Now suppose the demand for Hula Hoops shifts outward slightly. Show that, in general (contrary to the competitive case), it will not be possible to predict the effect of this shift in demand on the market price of Hula Hoops. c. Consider three possible ways in which the price elasticity of demand might change as the demand curve shifts: It might increase, it might decrease, or it might stay the same. Consider also that marginal costs for the monopolist might be increasing, decreasing, or constant in the range where MR=MC Consequently, there are nine different combinations of types of demand shifts and marginal cost slope configurations. Analyze each of these to determine for which it is possible to make a definite prediction about the effect of the shift in demand on the price of Hula Hoops.
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