Figure 15-4
The figure below depicts the demand and marginal cost curves of a profit-maximizing monopolist.

-Refer to Figure 15-4.If the monopoly operates at an output level below Q₀,then an increase in output toward Q₀ (but not so large an increase as to exceed Q₀)would
A)raise the price and raise total surplus.
B)lower the price and raise total surplus.
C)raise the price and lower total surplus.
D)lower the price and lower total surplus.

Question

Figure 15-4
The figure below depicts the demand and marginal cost curves of a profit-maximizing monopolist.
 
-Refer to Figure 15-4.If the monopoly operates at an output level below Q₀,then an increase in output toward Q₀ (but not so large an increase as to exceed Q₀)would
A)raise the price and raise total surplus. 
B)lower the price and raise total surplus. 
C)raise the price and lower total surplus. 
D)lower the price and lower total surplus.

Quizplus · Accepted Answer

If the monopoly operates at an output level below Q₀ and increases output towards Q₀ (but not exceeding Q₀), it will lower the price and raise total surplus. This is because as output increases, marginal cost falls and intersects the demand curve at a lower price. This lower price increases consumer surplus, which raises total surplus. The increase in output also generates additional profit for the monopolist, thus raising their surplus as well. Therefore, the correct option is B.

Figure 15-4 The Figure Below Depicts the Demand and Marginal Cost Curves