Asked by Ashley Devaprasad on May 16, 2024
Verified
Under which of the following situations would a monopolist increase profits by lowering price (and increasing output) :
A) if it discovered that it was producing where MC = MR.
B) if it discovered that it was producing where its MC curve intersects its demand curve.
C) if it discovered that it was producing where MC < MR.
D) under none of these circumstances because a monopolist would never lower price.
Increasing Profits
A financial strategy or outcome where a business experiences a growth in net earnings over time.
Lowering Price
A strategic move where a seller reduces the price of goods or services to attract more customers or beat competitors.
Monopolist
A market participant that is the sole seller of a good or service, thereby controlling the market.
- Determine the output range at which a monopolist achieves maximum profit by analyzing marginal cost and demand elasticity.
Verified Answer
CD
Corey DuncanMay 21, 2024
Final Answer :
C
Explanation :
A monopolist increases output and lowers price to increase profits when marginal cost (MC) is less than marginal revenue (MR), as this indicates that producing and selling an additional unit of output will add more to revenue than to costs.
Learning Objectives
- Determine the output range at which a monopolist achieves maximum profit by analyzing marginal cost and demand elasticity.