Suppose that a single-price monopolist knows the following information: The monopolist could maximize profits by

Question

Suppose that a single-price monopolist knows the following information:  The monopolist could maximize profits by

Quizplus · Accepted Answer

The monopolist can increase its profits by lowering the price and increasing the output. This is because a decrease in price will lead to an increase in demand, and thus selling more units may increase total revenue even with a lower price. As a monopolist, the cost of producing additional units is usually lower than the price they charge (due to economies of scale), so producing more units at a lower price can lead to increased profits.

Suppose That a Single-Price Monopolist Knows the Following Information