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-(Table: Demand and Total Cost) Look at the table Demand and Total Cost. Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The price effect of increasing production from 3 megawatts to 4 megawatts is:
A) -$150.
B) $500.
C) $450.
D) -$50.

Question

Use the following to answer questions: 
-(Table: Demand and Total Cost) Look at the table Demand and Total Cost. Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The price effect of increasing production from 3 megawatts to 4 megawatts is:
A) -$150. 
B) $500. 
C) $450. 
D) -$50.

Quizplus · Accepted Answer

The price effect is the change in total revenue due to a change in price when output increases. If increasing production from 3 to 4 megawatts causes a decrease in price, the price effect is negative. The price effect is calculated as the change in price multiplied by the original quantity. If the price decreases by $50 and the original quantity was 3 megawatts, the price effect is -$150.

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