Question #49409

Suppose that a monopolist is producing a level of output such that AVC = $6, AFC = $4, P = $8, MR = $10, and MC = $6. Based on this information, the firm is realizing:
1)a loss which could be reduced by reducing price and increasing output
2)a profit which could be increased by reducing price and increasing output
3)a loss which could be reduced by increasing price and reducing output
4)a profit which could be increased by increasing price and reducing output
If a profit maximizing monopolist is producing such that marginal cost is $10 and its marginal revenue is $4, it will increase its profits by:
1)reducing price and increasing output
2)increasing price and reducing output
3)reducing both price and output
4)increasing both price and output
5)raising price while keeping output unchanged

Expert's answer

4)a profit which could be increased by increasing price and reducing output

3)reducing both price and output

3)reducing both price and output

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