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After lowering her prices to bring in more customers, a small - town monopolist discovers her profits also decreased. Which of the following events can
After lowering her prices to bring in more customers, a smalltown monopolist discovers her profits also decreased. Which of the following events can explain what happened? Which cannot?
Explains What Happened
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At lower price levels, demand is very elastic, so the price effect is minimized.
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The loss in revenue due to the price effect exceeds the gain in revenue due to the output effect.
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With the increase in customers, MR is now greater than MC
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The new price and output level are at a point where MR MC
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Does Not Explain What Happened
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