Suppose a monopolist calculates that at present output and sales levels,marginal revenue is $1.00 and marginal cost is $2.00.He could maximize profits (or minimize losses)by:

Question

Quizplus · Accepted Answer

To maximize profits, a monopolist should produce where marginal revenue equals marginal cost. Since marginal cost ($2.00) is greater than marginal revenue ($1.00), the monopolist should increase price and decrease output to reduce output until MR equals MC.

Suppose a Monopolist Calculates That at Present Output and Sales