A single- price monopolist is currently producing an output level where P = $20, MR = $13, ATC =
$15, and MC = $14. In order to maximize profits, this monopolist should

Question

Quizplus · Accepted Answer

Currently, the monopolist is producing where MC = MR, which means that the monopolist is not maximizing profits. To maximize profits, the monopolist should decrease production (which will increase MC) and increase price (which will increase MR). This will allow the monopolist to produce at a higher price and lower quantity, which will increase profits as long as the new price and quantity combination still satisfy the profit-maximizing condition where MC = MR. Therefore, the best choice is to decrease production and increase price (Choice A).

A Single- Price Monopolist Is Currently Producing an Output Level