Suppose both a monopolist and a perfectly competitive firm are producing in their respective markets at a point where marginal cost is $8 and marginal revenue is $10. What should the profit-maximizing firms do?
A. Both the monopolist and the perfectly competitive firm should increase output until MC = MR.
B. Both the monopolist and the perfectly competitive firm should decrease output until MC = MR.
C. The monopolist should increase output but the perfectly competitive firm should shut down.
D. The monopolist should keep producing at this level but the perfectly competitive firm should decrease output until MC = MR.
Answer: A
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