For a profit-maximizing monopolist,when should output be increased to enhance economic well-being
A)as long as average revenue exceeds marginal cost
B)as long as average revenue exceeds average total cost
C)as long as marginal revenue exceeds marginal cost
D)as long as marginal revenue exceeds average total cost

Question

Quizplus · Accepted Answer

A profit-maximizing monopolist should produce where marginal revenue (MR) equals marginal cost (MC). This is because MR represents the additional revenue earned from selling one more unit, while MC represents the additional cost of producing one more unit. Therefore, producing up to the point where MR = MC ensures that the firm is maximizing its profits. Put another way, if the monopolist were to produce less than the MR = MC level, it could increase profits by producing more. On the other hand, if the monopolist were to produce more than the MR = MC level, it would decrease profits because the cost of producing additional units would exceed the revenue earned from selling those units. Therefore, output should be increased as long as marginal revenue exceeds marginal cost.

For a Profit-Maximizing Monopolist,when Should Output Be Increased to Enhance