Refer to the graph below for a pure monopoly. If the government regulated the monopoly and made it produce the level of output that would achieve allocative efficiency, what price and quantity levels would we observe in the short run?

In the short-run, any rise in the real exchange rate, EP /P, will cause

A) an upward shift in the aggregate demand function and a reduction in output. B) an upward shift in the aggregate demand function and an expansion of output. C) a downward shift in the aggregate demand function and an expansion of output. D) an downward shift in the aggregate demand function and a reduction in output. E) an upward shift in the aggregate demand function but leaves output intact.

A profit-maximizing monopolist will always operate where demand is unit elastic

a. True b. False