If a monopoly finds that at the present level of production, marginal revenue exceeds marginal cost, the firm should
A) shut down
B) increase production
C) maintain the production level because MR MC signifies economic profit
D) decrease production so that MC will equal MR
E) raise price

Question

If a monopoly finds that at the present level of production, marginal revenue exceeds marginal cost, the firm should
A) shut down
B) increase production
C) maintain the production level because MR > MC signifies economic profit
D) decrease production so that MC will equal MR
E) raise price

Quizplus · Accepted Answer

To maximize profits, a monopoly should produce until marginal revenue (MR) equals marginal cost (MC). If MR > MC, increasing production will increase profits until MR = MC.

If a Monopoly Finds That at the Present Level of Production