Both monopolists and cartel members will find that a drop in price leads to:

Question

Quizplus · Accepted Answer

Both monopolists and cartel members have market power and can influence the market price. If they decrease the price, there will be two effects: a quantity effect and a price effect. The quantity effect means that consumers will want to buy more as the price is lower, but the price effect means that the revenue from each unit sold will be less because of the lower price. For monopolists and cartel members, the price effect is usually stronger, so a drop in price leads to a reduction in total revenue.

Both Monopolists and Cartel Members Will Find That a Drop