Question

Consider a monopolist facing a straight line downward sloping demand curve. Suppose that the monopolist has constant marginal cost c>0 and wishes to maximise profit. At the optimal price and quantity choice, if the monopolist were to reduce its price marginally, the total revenue Select one: O a decreases. b. increases. O c. does not change. O d. Not enough information to determine.

Answer 1

Let's draw the go raph Here Here MC = Constant Let's take) MC=$3 assume)

P(6) $ 5 А $ 3 MC t 2 MR a Here Profit Maximization point = A quantity 11 prire : $ 5 it Seen that if from the graph Can be Price reduces Marginally then total Revcone (TR) = increases as compared to profit Maxionization point obil