Suppose that a single- price monopolist calculates that at its present output, marginal revenue is $2 and marginal cost is $1. If the price of the product is $3, the monopolist could maximize its profits by

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At present, the monopolist is not maximizing its profits, as its marginal revenue is greater than its marginal cost. This suggests that the monopolist could increase its profits by producing more output, as long as the additional revenue from selling that output exceeds the additional cost of producing it. Lowering the price would also increase the quantity demanded, which would lead to higher revenue. Therefore, the monopolist should lower the price and raise output to maximize its profits.

Suppose That a Single- Price Monopolist Calculates That at Its