Suppose a monopoly is producing output so that marginal revenue equals marginal cost. If the monopolist reduces output, it:
A) can charge a higher price.
B) will increase profits.
C) will decrease marginal revenue.
D) can charge a higher price and it will increase profits.

Question

Quizplus · Accepted Answer

Reducing output allows the monopolist to charge a higher price due to decreased supply, but it does not necessarily increase profits as it may move away from the profit-maximizing condition where marginal revenue equals marginal cost.

Suppose a Monopoly Is Producing Output So That Marginal Revenue