At His Current Level of Output, a Monopolist Has an MR

question 109

Multiple Choice

At his current level of output, a monopolist has an MR of $10, an MC of $6, and an economic profit of zero. If the market demand curve is downward sloping and his marginal cost curve upward sloping, the monopolist

• A) is producing his profit-maximizing level of output.
• B) could increase his profit by increasing his output.
• C) could increase his profit by increasing his price.
• D) should exit the market if he has positive fixed cost.

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Definitions:

Downstream Division

The part of a company or industry involved in the later stages of the production process, including distribution and retail.

Transfer Price

The price at which goods and services are sold between divisions within the same company, often used for budgetary and accounting purposes.

Buying Division

A specialized department within a company responsible for making purchase decisions and executing transactions.

Selling Division

A specialized department within a company responsible for overseeing and implementing sales strategies.