If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by
A) producing more and setting a higher price.
B) setting a lower price.
C) setting a higher price.
D) producing more while leaving price unchanged.

Question

Quizplus · Accepted Answer

If the demand for the monopoly's output becomes more elastic at the original output level, it means that consumers are more sensitive to changes in price. To maximize profits, the monopoly would need to lower its price to increase the quantity demanded. This would result in a lower profit margin per unit but overall higher profits due to the increased sales volume. Production levels may or may not change, depending on the extent to which the lower price leads to increased demand.

If a Monopoly Discovers That the Demand for Its Output