The discrepancy between a monopolist's marginal revenue and its price will be larger, the:
(a) larger the price elasticity of demand.
(b) larger the price elasticity of supply.
(c) smaller the response from its competitors.
(d) smaller the price elasticity of demand.
(e) smaller the price elasticity of supply.
Discrepancy here simply refers to the difference between a monopolist price and its marginal revenue. The higher the price it charges, the larger the discrepancy. Monopolist can increase its marginal revenue by increasing its output but in order to do that price has to be lowered.
Answer and Explanation: 1
_Option (d), smaller the price elasticity of demand is the correct choice.
This is because elasticity of demand affects the price that a monopolist...
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fromChapter 7 / Lesson 2
Understand the meaning of a monopoly in economics and what it does. Also, know the characteristics of a monopoly and the different types of monopolies.