Figure 15-4
-Refer to Figure 15-4. If the monopoly firm is currently producing Q3 units of output, then a decrease in output will necessarily cause profit to
A)remain unchanged.
B)decrease.
C)increase as long as the new level of output is at least Q2.
D)increase as long as the new level of output is at least Q1.

Question

Figure 15-4 
-Refer to Figure 15-4. If the monopoly firm is currently producing Q3 units of output, then a decrease in output will necessarily cause profit to
A)remain unchanged. 
B)decrease. 
C)increase as long as the new level of output is at least Q2. 
D)increase as long as the new level of output is at least Q1.

Quizplus · Accepted Answer

According to the diagram, at Q3 level of output, the marginal cost (MC) is greater than the marginal revenue (MR), resulting in a negative marginal profit. Therefore, any decrease in output will reduce the negative marginal profit, leading to an increase in profit. Thus, profit will decrease if output decreases.

Figure 15-4 -Refer to Figure 15-4. If the Monopoly Firm Is Currently