question archive If a monopoly is producing at an output level at which marginal revenue exceeds marginal cost, in order to increase its profit it will A
If a monopoly is producing at an output level at which marginal revenue exceeds marginal cost, in order to increase its profit it will A
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If a monopoly is producing at an output level at which marginal revenue exceeds marginal cost, in order to increase its profit it will
A. raise its price and decrease its output.
B. lower its price and increase its output.
C. raise its price and increase its output.
D. lower its price and decrease its output.
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Answer: B
If marginal revenue is greater than marginal cost, then an increase in output means revenue will increase by more than the increase in cost. This results in higher profit. The increased output though will push down prices as the monopolist is a price setter.
