Assume that at a given level of output, a monopoly firm has marginal revenue of $9, its average total cost is $9, and marginal cost is $7. If this firm were to increase its production by one unit, then its profit will
A) increase.
B) remain the same.
C) decrease.
D) change but cannot be determined without additional information.

Question

Quizplus · Accepted Answer

Since the marginal revenue ($9) is greater than the marginal cost ($7), increasing production by one unit will add more to revenue than to cost, thus increasing profit.

Assume That at a Given Level of Output, a Monopoly