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

breanna kelly · Accepted Answer

Final Answer : A, Explanation :  To maximize profits, a monopolist produces where marginal revenue (MR) equals marginal cost (MC). If MR < MC, reducing output will decrease costs more than revenues, increasing profits. Raising the price can compensate for the reduced output, maintaining or increasing revenue.

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

Related questions

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits byA) 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.