Monopolist lowers its price to increase unit sales

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Reference no: EM13837991

1. The XYZ Company is a porfit-maximizing firm with a monopoly in the production of UIC sweatshirts. The firm sells UIC sweatshirts for $25 each. We can conclude, therefore, that XYZ Company is producing at a level of output at which:

A) avergae total cost is equal to $25

B) average total cost is greater than $25

C) marginal revenue is equal to $25

D) marginal revenue is equal to marginal cost

E) None of the answer choices

2. Assume a monopolist sells its product or service for the same price to all buyers. Also assume that the monopolist lowers its price to increase unit sales (i.e. output). We know that if the price effect associated with an increase in output exceeds the quantity effect,

A) then marginal revenue must be positive

B) then marginal revenue must be equal to zero

C) then marginal revenue must be negative

D) there is not sufficient information to answer this question

Reference no: EM13837991

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