If a monopoly firm can sell its eighth unit of output for a price of $175,it may expect to receive a price __________ in order to sell more than eight units.
A)of more than $175
B)of $175
C)of less than $175
D)of $100
E)of less than $100

Question

Quizplus · Accepted Answer

Monopoly firms face a downward sloping demand curve. Selling the eighth unit for a high price of $175 is an indication that the firm is likely operating in a market with inelastic demand. To sell more than eight units, the firm would need to lower the price, thereby increasing the quantity demanded. However, as the firm lowers the price, the demand becomes more elastic, which means that the firm would need to accept a lower price to increase its sales. Therefore, the firm would expect to receive a price less than $175 to sell more than eight units.

If a Monopoly Firm Can Sell Its Eighth Unit of Output