If Penelope, a monopolist, is producing a quantity where MC MR, then profit:
A)is maximized.
B)is maximized only if MC = P.
C)can be increased by increasing production.
D)can be increased by decreasing production.

Question

If Penelope, a monopolist, is producing a quantity where MC> MR, then profit:
A)is maximized.
B)is maximized only if MC = P.
C)can be increased by increasing production.
D)can be increased by decreasing production.

Quizplus · Accepted Answer

When MC > MR, the monopolist is producing beyond the profit-maximizing level of output. This means that the last unit produced is costing more to make than it can be sold for. To increase profit, Penelope should decrease production to the point where MC = MR. Therefore, option D is the best choice. Option A is incorrect because maximizing profit requires producing at the point where MC = MR, not where MC > MR. Option B is incorrect because MC = P only holds in the case of perfect competition, not monopoly. Option C is incorrect because increasing production beyond the profit-maximizing quantity would lead to a further increase in MC, leading to an even lower MR and thus lower profits.

If Penelope, a Monopolist, Is Producing a Quantity Where MC>