For a monopoly producing any output level greater than one, the average revenue curve:
A. lies above the demand curve.
B. lies below the demand curve.
C. lies above the marginal revenue curve.
D. is the same as the marginal revenue curve.
Answer: C
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Xanfix sells wrenches and screwdrivers. It sells both products at the same price of $9.66 per unit. The firm calculates that the income elasticity of demand for wrenches is 1.5, while the income elasticity of demand for screwdrivers is 2.5 . If the overall consumer income is expected to increase by 6.8 percent in the year ahead, the company should: a. increase the production of both products,
but it should increase the production of screwdrivers by a greater amount than the production of wrenches. b. increase the production of both products, but it should increase the production of wrenches by a greater amount than the production of screwdrivers. c. increase the production of wrenches and decrease the production of screwdrivers. d. increase the production of screwdrivers and decrease the production of wrenches.