Suppose that a single-price monopolist knows the following information: The monopolist could maximize its profits by

Question

Suppose that a single-price monopolist knows the following information:  The monopolist could maximize its profits by

Quizplus · Accepted Answer

The monopolist can maximize its profits by raising the price and lowering the output. The given information suggests that the monopolist faces a downward-sloping demand curve, which means that as the price decreases, the quantity demanded increases. However, at the current price and output, the monopolist is not maximizing its profits, as it can potentially sell at a higher price and lower its costs by producing less. Therefore, by raising the price, the monopolist can increase its revenue per unit sold, and by decreasing the output, it can lower its costs per unit produced, resulting in higher profits.

Suppose That a Single-Price Monopolist Knows the Following Information