A single-price monopolist is currently producing an output level where price equals marginal cost,and profits are positive.In order to maximize profits,this monopolist should

Question

Quizplus · Accepted Answer

The monopolist is currently producing where price equals marginal cost, which is known as the efficient output. However, the monopolist is earning positive profits which imply that it has some market power. To maximize profits, the monopolist should reduce production and increase price, which would allow it to capture more consumer surplus and increase its profits. This is because the monopolist can sell its output at a higher price than its marginal cost and still face some downward-sloping demand curve due to its market power. Therefore, the correct answer is C.

A Single-Price Monopolist Is Currently Producing an Output Level Where