1) A monopolist wishing to increase its profit has just discovered that lowering
ID: 1162767 • Letter: 1
Question
1) A monopolist wishing to increase its profit has just discovered that lowering its price and selling more output yielded the desired result. Profit increased. Based on this, we can conclude that the cost of the additional production is A) greater than the revenue from the additional production. B) less than the revenue from the additional production. C) there is no way to answer this because you have not given us the marginal revenue and marginal cost data. D) precisely equal to the revenue from the additional production.
Explanation / Answer
To increase the profit the cost of production needs to be less than the revenue form the additional production. As Profit = Total revenue - total cost. IF the cost exceeds the revenue the profit will decline.
The answer is "B", Cost of additional production is less than the revenue from the additional production.
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