If a Monopolist Is Producing a Quantity Where Marginal Revenue

question 45

Multiple Choice

If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal cost is equal to $30,the monopolist should:

• A) increase production and lower the price to maximize profits.
• B) decrease production and increase the price to maximize profits.
• C) continue producing at the current price to maximize profits.
• D) increase production and increase the price to maximize profits.
• E) decrease production and decrease the price to maximize profits.

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Definitions:

Investment Centers

Parts of an organization that are responsible for their revenue, expenses, and investment in assets, allowing for a close measure of profitability.

Transfer Pricing

The pricing of goods, services and intangibles between associated enterprises that are under common ownership or control.

Selling Division

A segment or branch of a company responsible for marketing and selling its products or services.

Full Cost

The total cost of production that includes both direct costs, like raw materials and labor, and indirect costs, like overhead.