Exhibit 8-7 Monopolist

-According to the information provided in Exhibit 8-7,if the Rudd Ice Company was a monopoly and is currently charging a price of $10,what would you advise Rudd to do?
A) Stay where he is currently operating because he is charging the profit-maximizing price.
B) Increase price and increase output.
C) Decrease price and increase output.
D) Increase output and hold price constant.
E) Increase price and hold output constant.

Question

Exhibit 8-7 Monopolist
 
-According to the information provided in Exhibit 8-7,if the Rudd Ice Company was a monopoly and is currently charging a price of $10,what would you advise Rudd to do?
A) Stay where he is currently operating because he is charging the profit-maximizing price. 
B) Increase price and increase output. 
C) Decrease price and increase output. 
D) Increase output and hold price constant. 
E) Increase price and hold output constant.

Quizplus · Accepted Answer

As a monopoly, Rudd is currently charging the profit-maximizing price of $10, but they are not producing at the profit-maximizing level, as the marginal revenue ($9) is greater than the marginal cost ($6). By decreasing the price and increasing output, Rudd can capture more market share and increase their profit. Therefore, choice C is the best option.

Exhibit 8-7 Monopolist -According to the Information Provided in Exhibit 8-7,if the Rudd