A monopolist earning economic profit in the short run determines that at its present level of output, marginal revenue is 23 and marginal cost is 30 . Which of the following should the firm do to increase profit?
a. Raise price and lower output.
b. Lower price and lower output.
c. Raise price and raise output.
d. Lower price and raise output.
e. Lower output, but leave price unchanged.
Question 2
Greg spends his entire budget on two goods: he plays video games at the mall arcade and he buys pizza. He discovers that his MU/P of video games is lower than his MU/P of pizza. From this, we know that he would be:
a. happier eating less pizza and playing fewer video games.
b. happier eating less pizza and playing more video games.
c. happier eating more pizza and playing fewer video games.
d. indifferent to which selection he makes.
e. as happy as possible, since he is already maximizing total utility.
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