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

Question

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

Quizplus · Accepted Answer

A monopolist would increase profits by lowering price and increasing output if it is producing where marginal cost (MC) is less than marginal revenue (MR), as this indicates that producing additional units would add more to revenue than to cost.

Under Which of the Following Situations Would a Monopolist Increase