Suppose that a monopoly is currently producing the quantity at which marginal revenue is less than marginal cost. The monopoly can increase its profit by ________.
A) shutting down
B) lowering its price and increasing its output
C) raising its price and decreasing its output
D) lowering its price and decreasing its output
Question 2
Sarah consumes only strawberries and cream, and she is spending all of her income. Her marginal utility of her last dish of strawberries is 200 and her marginal utility of her last pint of cream is 200.
The price of strawberries is 1.00 per dish and the price of cream is 2.00 per pint. To maximize her utility, Sarah should
A) buy more strawberries and less cream.
B) buy more cream and less strawberries.
C) not change her purchases of strawberries and cream.
D) definitely buy no cream at her consumer equilibrium.
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