A nondiscriminating monopolist earning positive short-run economic profit determines that its current marginal cost is $15 and its current marginal revenue is $20.To maximize profit, a firm should
A)raise price and increase output
B)raise price and decrease output
C)maintain a constant price and increase output
D)reduce price and increase output
E)shut down

Question

Quizplus · Accepted Answer

To maximize profit, the firm should produce where marginal cost equals marginal revenue. Since MR ($20) is greater than MC ($15), the firm should reduce price and increase output to reach the profit-maximizing level where MR = MC.

A Nondiscriminating Monopolist Earning Positive Short-Run Economic Profit Determines That