Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00. It could maximize profits or minimize losses by

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Business

Aron Keller

11 September, 10:19

Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00. It could maximize profits or minimize losses by

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Oswaldo Church · Answer 1

B. Increase price and Reduce output

Explanation:

Since the monopolist is making losses, the best decision to overturn that loss is for the monopolist to increase price and reduce output. A monopolist controls all the market for a particular goods or services, therefore, he can decide to reduce the number of output of that particular product which in turn makes demand become larger than the supply. By doing so it will lead to a shortage that the monopolist can then take advantage on by increasing the price of the available goods or services.