If a Monopolist's Marginal Revenue Is $3

question 127

Multiple Choice

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by

• A) reducing output and raising price.
• B) reducing both output and price.
• C) increasing both price and output.
• D) raising price while keeping output unchanged.

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Definitions:

Quantity Demanded

The amount of a product consumers are willing and able to purchase at a specific price.

Law of Demand

A fundamental principle in economics that describes the inverse relationship between the price of a good or service and the quantity demanded by consumers, holding other factors constant.

Quantity Demanded

The aggregate quantity of a product or service buyers are prepared to buy at a certain price point, within a specific timeframe.

Demand

The desire to purchase goods and services backed by the ability and willingness to pay, at a given price level within a specific time period.