Suppose a monopolist is producing a level of output such that MR MC.What should the firm do to maximize its profits?
A)The firm should do nothing - it wants to maximize the difference between MR and MC in order to maximize its profits.
B)The firm should hire less labor.
C)The firm should increase price.
D)The firm should increase output.

Question

Suppose a monopolist is producing a level of output such that MR > MC.What should the firm do to maximize its profits?
A)The firm should do nothing - it wants to maximize the difference between MR and MC in order to maximize its profits.
B)The firm should hire less labor.
C)The firm should increase price.
D)The firm should increase output.

Quizplus · Accepted Answer

When MR > MC, increasing output will increase profits until MR equals MC, which is the profit-maximizing condition for a monopolist.

Suppose a Monopolist Is Producing a Level of Output Such