A Monopolist Is Currently Producing an Output Level Where Price

question 18

Multiple Choice

A monopolist is currently producing an output level where price equals marginal cost, and profits are positive. In order to maximize profits, this monopolist should

• A) decrease production and increase price.
• B) reduce price and let production adjust to the new price.
• C) not change his output level, because he is currently earning profits.
• D) shut down.
• E) increase production and reduce price.

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Definitions:

Difference Thresholds

The minimum difference in stimulation that a person can detect 50 percent of the time, also known as the just noticeable difference (JND).

Absolute Thresholds

The minimum stimulus intensity required to be perceptible to the senses.

Sensory Adaptation

The process by which sensory receptors become less sensitive to constant stimuli over time, reducing our awareness of them.

Subliminal Persuasion

A method of influence that operates below the level of conscious awareness, where stimuli are used to affect an individual's thinking or behavior without them being aware of it.