After lowering her prices to bring in more customers, a small$-$town 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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