Suppose a monopolist's costs and revenues are as follows: ATC = $45.00; MC = $35.00; MR = $35.00; P = $45.00. The firm should
A) increase output and decrease price.
B) decrease output and increase price.
C) not change output or price.
D) shut down.

Question

Quizplus · Accepted Answer

The monopolist should continue producing the current output level, as MR = MC ($35.00), indicating that the current output is maximizing profit. The firm should also maintain the current price of $45.00 since MR = P ($45.00). Therefore, there is no reason to change the output or the price. If the firm shuts down, it would incur a loss equal to its fixed costs, which are not given in the problem.

Suppose a Monopolist's Costs and Revenues Are as Follows: ATC