If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal cost is equal to $30,the monopolist should:
A) increase production and lower the price to maximize profits.
B) decrease production and increase the price to maximize profits.
C) continue producing at the current price to maximize profits.
D) increase production and increase the price to maximize profits.
E) decrease production and decrease the price to maximize profits.

Question

Quizplus · Accepted Answer

If marginal revenue is greater than marginal cost, then the monopolist should increase production to sell more at a lower price to maximize profits. In this case, since marginal revenue ($32) is greater than marginal cost ($30), the monopolist should increase production and lower the price to maximize profits.

If a Monopolist Is Producing a Quantity Where Marginal Revenue