A non-discriminating monopolist observes that marginal revenue is $23 and marginal cost is $30 at its present output level.In order to maximize profit,it should _____
A)raise price and lower output.
B)lower both price and output.
C)raise both price and output.
D)lower price and raise output.
E)lower output but leave price unchanged.

Question

Quizplus · Accepted Answer

To maximize profit, a monopolist should produce at the level where marginal revenue (MR) equals marginal cost (MC). Since MR ($23) is less than MC ($30), the monopolist is producing too much and should reduce output. Reducing output typically leads to an increase in price due to the inverse relationship between price and quantity demanded in most markets.

A Non-Discriminating Monopolist Observes That Marginal Revenue Is $23 and Marginal