This graph shows the cost and revenue curves faced by a monopoly.
According to the graph shown,if Q2 units are being produced,this monopolist:
A)is not maximizing profits.
B)is producing where marginal costs are less than marginal revenue.
C)is earning negative profits.
D)should increase production.

Question

This graph shows the cost and revenue curves faced by a monopoly. 
According to the graph shown,if Q2 units are being produced,this monopolist:
A)is not maximizing profits. 
B)is producing where marginal costs are less than marginal revenue. 
C)is earning negative profits. 
D)should increase production.

Quizplus · Accepted Answer

If Q2 units are being produced, the marginal cost is greater than the marginal revenue. Thus, the monopolist is not maximizing profits. To reach the profit-maximizing level of output, the monopolist should increase production to the point where marginal cost equals marginal revenue.

This Graph Shows the Cost and Revenue Curves Faced by a Monopoly