Suppose that a monopolist calculates that at its present output level, marginal cost is $4.00 and marginal revenue is $5.00. The firm could increase profits by
A) decreasing price and increasing output.
B) increasing price and decreasing output.
C) decreasing price and leaving output unchanged.
D) decreasing output and leaving prices unchanged.

Question

Quizplus · Accepted Answer

Since marginal revenue ($5.00) is greater than marginal cost ($4.00), the firm can increase profits by increasing output, which typically involves decreasing price in a monopolistic market.

Suppose That a Monopolist Calculates That at Its Present Output