Suppose that for a monopoly average total cost is $3.50, marginal cost is $3.00, and marginal revenue is $3.00 with a selling price of $4.00. To maximize profits, the monopoly should
A)change neither price nor output.
B)increase both output and price.
C)decrease both output and price.
D)increase output but decrease price.
E)decrease output but increase price.

Question

Quizplus · Accepted Answer

Since the marginal cost and marginal revenue are equal, the monopoly is already producing the optimal quantity of output. Changing the price or output would result in lower profits. Therefore, the monopoly should stick with the current price and output level.

Suppose That for a Monopoly Average Total Cost Is $3