If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal cost is equal to $30,the monopolist should ________ to maximize profits.
A) increase production and lower the price
B) decrease production and increase the price
C) continue producing at the current price
D) increase production and increase the price
E) decrease production and decrease the price

Question

Quizplus · Accepted Answer

For a monopolist, the profit-maximizing quantity is where marginal revenue (MR) equals marginal cost (MC). In this scenario, the marginal revenue is greater than the marginal cost, indicating that the monopolist can increase profits by producing more. To do so, the monopolist should lower the price to attract more customers and increase production. Therefore, the best option for the monopolist is to increase production and lower the price.

If a Monopolist Is Producing a Quantity Where Marginal Revenue