If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50,it will increase its profits by:

A) reducing output and raising price.
B) reducing both output and price.
C) increasing both price and output.
D) raising price while keeping output unchanged.

Question

Black Wizard · Accepted Answer

Final Answer : A, Explanation :  Since the monopolist's marginal cost is greater than its marginal revenue, it means that it is currently producing at a level where the cost of producing an additional unit is higher than the revenue generated by selling that unit. Therefore, the monopolist should reduce its output and raise the price to increase its profits. By reducing the output, the marginal cost would decrease and become closer to the marginal revenue. By raising the price, the revenue generated from each unit sold would increase, further increasing the profits.

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50,it will increase its profits by:

A) reducing output and raising price.
B) reducing both output and price.
C) increasing both price and output.
D) raising price while keeping output unchanged.

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Learning Objectives

Learning Objectives

Related questions

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50,it will increase its profits by:A) reducing output and raising price.B) reducing both output and price.C) increasing both price and output.D) raising price while keeping output unchanged.

Definitions

Learning Objectives

Learning Objectives

Related questions

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50,it will increase its profits by:

A) reducing output and raising price.
B) reducing both output and price.
C) increasing both price and output.
D) raising price while keeping output unchanged.