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

Respuesta :

Answer:

D) raising price while keeping output unchanged

Explanation:

In order for any type of business to survive in the long run, marginal revenue must be equal to marginal cost, or Price = Marginal cost.

If a business sells their products at a price lower than their marginal cost, it is losing money. But under certain circumstances it might do it on the short run if at least the Price = Variable costs

In this case, the monopolist must increase its price to match its marginal cost. Profits are maximized when marginal revenue equals marginal costs.