Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00. It could maximize profits or minimize losses by
A) decreasing price and increasing output.
B) increasing price and decreasing output.
C) decreasing price and leaving output unchanged.
D) decreasing output and leaving price unchanged.

Question

Quizplus · Accepted Answer

To maximize profits, a monopolist should produce where marginal revenue equals marginal cost. Since marginal cost ($2.00) is greater than marginal revenue ($1.00), the monopolist should increase price and decrease output to reach the profit-maximizing condition.

Suppose That a Monopolist Calculates That at Its Present Output