A monopolist calculates her marginal revenue to be $15 and her marginal cost to be $16.One can infer that she
A) is minimizing any losses.
B) should expand output.
C) is maximizing profit.
D) should reduce output.
E) should raise her price.

Question

Quizplus · Accepted Answer

The monopolist's marginal cost is greater than her marginal revenue, indicating that she is producing at a point where the cost of producing an additional unit of output exceeds the revenue earned from selling that unit. This means that producing less (reducing output) would result in a lower cost while still earning revenue from the current level of sales, leading to an increase in profit. Therefore, the best choice is to reduce output.

A Monopolist Calculates Her Marginal Revenue to Be $15 and Her