In general,as a monopolist increases its output rate,its profit
A) rises steadily.
B) falls steadily.
C) first rises but then falls.
D) first falls but then rises.
E) remains constant.

Question

Quizplus · Accepted Answer

As a monopolist increases its output rate, it first experiences increasing profits due to the economies of scale, lower cost per unit, and a larger market share. However, at some point, the monopolist may face diminishing marginal returns, higher marginal costs, and possibly reduced demand for its product as prices lower due to increased competition. As a result, the monopolist's profit curve may begin to slope upward initially but then fall afterward, leading to the choice of C as the best answer.

In General,as a Monopolist Increases Its Output Rate,its Profit