In the context of a monopolist, what does the price effect imply?

The price effect in the context of a monopolist refers to the impact on total revenue when a monopolist chooses to lower the price to sell more units. Specifically, when the monopolist decreases the price to sell an additional unit, it is necessary to reduce the price for all previously sold units as well. This action directly affects total revenue because while the monopolist gains additional sales from the lower price, it also loses revenue on all units sold at the higher price.

Thus, the last unit sold, which incurs a price cut, means that the total revenue does not necessarily increase because the revenue decrease from the price reduction affects all units previously sold. This interaction highlights the inherent trade-off a monopolist faces—the need to balance the additional revenue gained from selling more units against the revenue lost from reducing prices on units that could have been sold at a higher price.

The correct answer underscores the complex nature of a monopolist's pricing strategy, where a reduction in price can lead to a net decrease in total revenue due to the overall price cut applied to all units sold.