A profit maximizing monopolist faces the following information: P = $4, MR = $2, MC = $1.50.The firm should
A)Shut down
B)Decrease output
C)Increase output
D)Stay at its current level of output

Question

Quizplus · Accepted Answer

The monopolist will maximize profit where MC=MR. Here, MC=$1.50 and MR=$2, therefore the monopolist could increase output and still earn a positive profit margin. If the monopolist were to decrease output or shut down, they would earn a negative profit margin. Therefore, the best choice would be to increase output.

A Profit Maximizing Monopolist Faces the Following Information: P =