Suppose that a monopolist calculates that at present output and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or minimize losses by:

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14 January, 11:20

Suppose that a monopolist calculates that at present output and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or minimize losses by:

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Martin · Answer 1

The firm must increase price and decreasing the output

Explanation:

The reason is that with increased level of activity (Production level) the marginal cost increases and if the firm is going to increase it product price then less people will buy its product. This means the company will have to produce less in quantity which means that the company will substantially reduce its marginal cost and increase its marginal revenue.