Suppose That a Monopolist Calculates That at Its Present Output

question 218

Multiple Choice

Suppose that a monopolist calculates that at its present output level, marginal cost is $4.00 and marginal revenue is $5.00. The firm could increase profits by

• A) decreasing price and increasing output.
• B) increasing price and decreasing output.
• C) decreasing price and leaving output unchanged.
• D) decreasing output and leaving prices unchanged.

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Definitions:

Amortization

The process of spreading out a loan into a series of fixed payments over time or the gradual writing off of the initial cost of an intangible asset.

Bond Premiums

The amount by which the price of a bond exceeds its face value.

Discounts

Reductions in price offered to customers, often as an incentive to increase sales or prompt early payment.

Bond Issue

The process of offering bonds for sale to potential investors, typically to raise capital for a corporation or government.