At a Given Level of Output, a Monopolist's Marginal Revenue

question 42

Multiple Choice

At a given level of output, a monopolist's marginal revenue is $10, marginal cost is $6, and economic profit is zero. If the market demand curve is downward sloping and its marginal cost curve is upward sloping, the monopolist:

• A)can increase profit by increasing both output and price.
• B)can increase profit by increasing output and decreasing its price.
• C)can increase profit by increasing its price and decreasing its output.
• D)should exit the market if significant fixed costs have been incurred.
• E)can increase profit by decreasing both output and price.

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Definitions:

Elastic Demand

Elastic demand refers to a situation where the quantity demanded of a product changes significantly in response to changes in its price.

Consultant

A professional who provides expert advice in a particular area or industry.

Round Trip

A journey to a destination and back to the original starting point, usually referring to travel.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating its sensitivity to price changes.