Suppose that a monopoly is currently producing the quantity at which marginal revenue is less than marginal cost. The monopoly can increase its profit by
A) shutting down.
B) lowering its price and increasing its output.
C) lowering its price and decreasing its output.
D) not changing its price and increasing its output.
E) raising its price and decreasing its output.

Question

Quizplus · Accepted Answer

When marginal revenue is less than marginal cost, the firm is producing too much. By raising its price and decreasing its output, the monopoly can reduce production to the point where marginal revenue equals marginal cost, thus maximizing profit.

Suppose That a Monopoly Is Currently Producing the Quantity at Which