QUESTION 3 Consider a monopolist facing a downward-sloping demand curve. Average revenue is equal to v demand and lies above marginal revenue. Compared to a competitive market, a monopolist sells a lower v quantity at a higher v price. Compared to a competitive market, a monopsonist buys a lower v quantity at a lower v price. If, at the current level of output, a monopolist determines that the elasticity of demand is -0.15, then the monopolist should decrease output v.

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