A Monopolist Produces at a Point Where the Price Elasticity

question 13

Multiple Choice

A monopolist produces at a point where the price elasticity of demand is -0.7 and the marginal cost is $2. If you were hired to advise this monopolist on how to increase his profits, you would find that the way to increase his profits is to

• A) increase his output.
• B) lower the price.
• C) decrease his output.
• D) produce the output level where marginal cost equals price.
• E) increase his advertising efforts.