The following figure shows the demand curve faced by a monopolist.

-Refer to the figure above.What is the price effect of a price increase from $3 to $5?
A) $200
B) $400
C) $800
D) $1,000

Question

The following figure shows the demand curve faced by a monopolist.
 
-Refer to the figure above.What is the price effect of a price increase from $3 to $5?
A) $200 
B) $400 
C) $800 
D) $1,000

Quizplus · Accepted Answer

The price effect of a price increase can be calculated by multiplying the change in price by the initial quantity demanded. Without the specific figure, a general explanation is that if the price increases from $3 to $5, this is a $2 increase. If initially, for example, 400 units were demanded at $3, the price effect would be 400 units * $2 = $800.

The Following Figure Shows the Demand Curve Faced by a Monopolist