At a price of $10, the marginal revenue of a monopolist is $6. If the marginal cost of production is $8, what should the monopolist do in order to maximize profits?
A)Increase its price.
B)Decrease its price.
C)Keep its price at the same level.
D)not enough information to solve

Question

Quizplus · Accepted Answer

To maximize profits, a monopolist should produce where marginal revenue equals marginal cost. Since the marginal revenue ($6) is less than the marginal cost ($8), the monopolist should increase its price to reduce output until marginal revenue equals marginal cost.

At a Price of $10, the Marginal Revenue of a Monopolist