a. A monopolist finds that at its current level of output the marginal cost of production...
a. A monopolist finds that at its current level of output the marginal cost of production is $9, the average total cost is $9.95,the average variable cost is $9.75 and its marginal revenue is $9.45. What would you recommend that the monopolist do to increase profits? One word answer is not enough. Explain.
b. A monopolist determines that at the current level of output the marginal revenue is $9.00 and its marginal cost is $10. What should the monopolist do to increase profits? One word answer is not enough. Explain.
Homework Answers
1.The monopolist should increase production.As production rises MR falls and MC rises.Production should occur until the point at which MR=MC is achieved.
2.In theis case the MC>MR.If the monopolist reduces production then MC falls and MR rises.
Monopolist should reduce production.
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