GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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If a monopolist is producing under decreasing cost conditions, increase in demand is beneficial to the society because
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Consumers get better quality goods
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Goods will be sold in many markets
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Cost of production falls and hence price
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None of the above
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Explanation:
Detailed explanation-1: -If demand is price elastic, a price reduction increases total revenue. To sell an additional unit, a monopoly firm must lower its price. The sale of one more unit will increase revenue because the percentage increase in the quantity demanded exceeds the percentage decrease in the price.
Detailed explanation-2: -Understanding Monopoly A monopolist can raise the price of a product without worrying about the actions of competitors. In a perfectly competitive market, if a firm raises the price of its products, it will usually lose market share as buyers move to other sellers.
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