A decrease in the demand facing a monopoly firm would _______ quantity and _______ price. The demand is inelastic.Question 17Select one:a.increase; increaseb.increase; decreasec.decrease; increased.decrease; decrease
Question
A decrease in the demand facing a monopoly firm would _______ quantity and _______ price. The demand is inelastic.Question 17Select one:a.increase; increaseb.increase; decreasec.decrease; increased.decrease; decrease
Solution
The correct answer is c. decrease; increase.
Here's why:
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A decrease in demand means that consumers want to buy less of the product at any given price. This could be due to a variety of factors, such as a change in consumer tastes or the introduction of a new substitute product.
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A monopoly firm is the only seller in the market, so it has the power to set its own price. When demand decreases, the firm will sell less quantity.
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Because the demand is inelastic, consumers' quantity demanded is not very responsive to changes in price. This means that even if the firm raises its price, the quantity demanded will not decrease by much.
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Therefore, in response to a decrease in demand, a monopoly firm will decrease the quantity it sells and increase its price.
Similar Questions
Which of the following statements can be inferred for a monopoly? Choose the most appropriate option.If the monopoly increases the price, quantity demanded would fall.If the monopoly increases the price, the revenue would increase.If the monopoly decreases supply, its costs would increase.If the monopoly decreases supply, its costs would decrease.
a. If price increases by 10 percent and quantity demanded decreases by 15 percent, demand is . b. If price decreases by 10 percent and quantity demanded increases by 5 percent, demand is .
Which of these results in an increase in both price and quantity?A.A demand increaseB.A supply increaseC.A demand decreaseD.A supply decrease
Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease total revenue?Group of answer choices0.80.011.5
If a monopolistically competitive seller can convince buyers that its product is of better quality and value than products sold by rival firms, all of the following occur EXCEPT _______________.a.demand increases.b.the firm gains more control over its pricec.demand becomes more inelastic.d.demand becomes perfectly elastic.
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