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When a monopolist increases the number of units it sells, there are two effects on revenue. They are the
a. demand effect and the supply effect.
b. competition effect and the cost effect.
c. competitive effect and the monopoly effect.
d. quantity effect and the price effect.

Respuesta :

Answer:

The correct answer is option d.

Explanation:

For a competitive industry, there is no price effect on revenue. The firm is a price taker. When the firm changes it quantity sold, it faces the output effect on revenue.  

A monopolist firm, on the other hand, faces both output effect and price effect on the revenue. Since a monopoly firm is a price maker and faces a downward sloping curve. It needs to reduce the price to increase output. To increase the marginal revenue it needs to increase output.  

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