27. Which of the following is a possible explanation for the fall in prices afte

Question

27. Which of the following is a possible explanation for the fall in prices after an industry is monopolized by combining a group of competitors?
Need the Answer:
A monopolist faces a downward sloping demand curve. Hence, output expansion leads to lower prices.
A reduction in price increases producer surplus. Hence a monopolist may reduce the price of his product.
A monopolist may reduce prices to make it difficult for other firms to compete.
A monopolist can increase profits by reducing price when its cost of production declines due to increased size of the new firm. The fall in price is less than the decline in cost.

Explanation / Answer

A reduction in price increases producer surplus. Hence a monopolist may reduce the price of his product.

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