Ameritech has a monopoly over local telephone service. If Ameritech is producing where marginal revenue is less than marginal cost, the firm
A) could increase profits by reducing output.
B) could increase profits by increasing output.
C) is maximizing profits.
D) must be earning a zero profit.

Question

Quizplus · Accepted Answer

When marginal revenue is less than marginal cost, reducing output can help the firm increase profits by eliminating production that costs more than it brings in revenue.

Ameritech Has a Monopoly Over Local Telephone Service