A monopolist is currently producing a level of output where Price = $110; Marginal Revenue = $10; Quantity = 100; Total Cost = $15,000; Marginal Cost = $10; Total Fixed Cost = $4,000.

1. To maximize profits in the short-run, the monopolist should:

(a) Increase output
(b) Decrease output
(c) Produce the same output
(d) Shut down
(e) None of the above

2. To maximize profits in the long-run, the monopolist should:

(a) Increase output and remain open
(b) Decrease output and remain open
(c) Produce the same output and remain open
(d) Shut down
(e) None of the above

My answer:
a)
MR=MC so no need to change output and P>AVC (110>11) so don't shut down. Therefore, ;eave output the same.

b)
MR=MC so don't change output and P>ATC (110> 15) so don't shut down. Again. ;eave output te same.

For part B, it says the answer is to shut down. Could someone pleeease help me. Thanks

In the short-run, to maximize profits, the monopolist should produce the same output. This is because the monopolist is already maximizing profits when marginal revenue (MR) equals marginal cost (MC). Since increasing or decreasing output would change this balance and potentially lower profits, the monopolist should maintain the current level of output.

Regarding the long-run, the monopolist should shut down if it cannot cover its total variable costs (TVC) with the price it receives for the product. The shut down decision is based on comparing price to average variable cost (P > AVC). If the price is less than average variable cost, the monopolist should shut down in the long-run. In this case, since the price is $110 and the average variable cost is $11, the monopolist should not shut down and should remain open. Therefore, the correct answer for the long-run is (c), produce the same output and remain open.

So, in summary:

1. (c) Produce the same output.
2. (c) Produce the same output and remain open.

To answer the question correctly, let's go through each option step by step and use the given information to determine the correct response.

1. To maximize profits in the short-run, the monopolist should:
(a) Increase output
(b) Decrease output
(c) Produce the same output
(d) Shut down
(e) None of the above

To maximize profits in the short-run, a monopolist should produce where marginal revenue (MR) equals marginal cost (MC). In this case, you mentioned that MR = $10 and MC = $10. Since MR and MC are equal, there is no need to change the level of output.

Next, we need to check if the monopolist should shut down based on the given information. To determine this, we need to compare price (P) with the average variable cost (AVC). In the given scenario, price (P) is $110, which is greater than the average variable cost (AVC) of $11. When price (P) is greater than the average variable cost (AVC), the monopolist should continue to produce and operate in the short-run. Therefore, the answer is (c) Produce the same output.

2. To maximize profits in the long-run, the monopolist should:
(a) Increase output and remain open
(b) Decrease output and remain open
(c) Produce the same output and remain open
(d) Shut down
(e) None of the above

To maximize profits in the long-run, a monopolist should produce where marginal revenue (MR) equals marginal cost (MC). From the given information, we know that MR = $10 and MC = $10. Since MR and MC are equal, there is no need to change the level of output.

However, in the long-run, the monopolist should also consider whether they should remain open or shut down based on the comparison of price (P) and average total cost (ATC). In this scenario, the price (P) is $110, which is greater than the average total cost (ATC) of $15. When price (P) is greater than the average total cost (ATC), it is profitable for the monopolist to remain open in the long-run.

Therefore, the correct answer is (c) Produce the same output and remain open.

To summarize:
1. To maximize profits in the short-run, the monopolist should produce the same output.
2. To maximize profits in the long-run, the monopolist should produce the same output and remain open.

If you have any further questions, please feel free to ask!