Figure 7.2
-Figure 7.2 shows a monopolist's demand curve. Suppose that the marginal cost is $6 for all units and the current output level is 4 units. Then what would you recommend to the firm?
A) Lower the price to sell more units.
B) Raise the price and sell fewer units.
C) Maintain the current price and output level.
D) There is not sufficient information.

Question

Figure 7.2
-Figure 7.2 shows a monopolist's demand curve. Suppose that the marginal cost is $6 for all units and the current output level is 4 units. Then what would you recommend to the firm?
A) Lower the price to sell more units. 
B) Raise the price and sell fewer units. 
C) Maintain the current price and output level. 
D) There is not sufficient information.

Quizplus · Accepted Answer

At the current output level of 4 units, the monopolist is charging a price of $12 per unit. However, at this price level, the quantity demanded is greater than the quantity supplied, indicating that the monopolist could increase its profit by raising the price. Therefore, the best choice would be to raise the price and sell fewer units.

Figure 7.2 -Figure 7.2 Shows a Monopolist's Demand Curve. Suppose That the That