Answer to Question #52946 in Microeconomics for Yana

Question

multiple choice
1. A monopolist earning economic profit in the short run determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?
a. Raise price and lower output.
b. Lower price and lower output.
c. Raise price and raise output.
d. Lower price and raise output.
e. Lower output, but leave price unchanged.

2. If marginal costs increase, a monopolist will:
a. decrease price and increase output.
b. decrease both price and output.
c. increase price and decrease output.
d. increase both price and output.
e. keep both price and output at the same level.

Answer 1

1. A monopolist earning economic profit in the short run determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit? 
To make MC = MR the monopolist should
a. Raise price and lower output.
2. If marginal costs increase, a monopolist will need to make MC = MR, so he should:
c. increase price and decrease output.