If a monopolist is producing a quantity where marginal revenue is equal to $16 and the marginal cost is equal to $17,the monopolist should:
A) increase production and lower the price to maximize profits.
B) decrease production and increase the price to maximize profits.
C) continue producing at the current price to maximize profits.
D) increase production and increase the price to maximize profits.
E) decrease production and decrease the price to maximize profits.

Question

Quizplus · Accepted Answer

If the monopolist is producing where marginal revenue is less than marginal cost i.e. MR<$MC, then they are not maximizing their profits. They should reduce their production and increase the price to increase their profit margin until MR=MC where the profit is maximum. Therefore, the best choice is to decrease production and increase the price to maximize profits.

If a Monopolist Is Producing a Quantity Where Marginal Revenue