Question

When a monopolist increases the amount of output that it produces and sells, the price of its output

a. stays the same.
b. increases.
c. decreases.
d. may increase or decrease depending on the price elasticity of demand.

Answer 1

c. Decreases.

Step-by-step explanation:

Since the demand curve for a monopolist is like a normal demand curve with a negative slope, when the output increases the price decreases, as otherwise the monopolist would not be able to sell the additional units. This is why monopolists limit their production in order to charge maximum possible prices to earn economic profits.

Hope that helps.