A monopoly is producing output so that average total cost is $30,marginal revenue is $40,and the price is $50.If ATC is at its minimum level and the ATC curve is U-shaped,to maximize profits,this firm should:
A)increase output.
B)reduce output.
C)do nothing;it is already maximizing profits.
D)shut down.

Question

Quizplus · Accepted Answer

The firm should increase output because it is currently in a situation where its marginal revenue exceeds its average total cost, indicating that it is not producing at its maximum potential. By increasing output, it can continue to generate profits and move towards its maximum potential, where marginal revenue is equal to marginal cost.

A Monopoly Is Producing Output So That Average Total Cost