A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing
A) a loss that could be reduced by producing more output.
B) a loss that could be reduced by producing less output.
C) an economic profit that could be increased by producing more output.
D) an economic profit that could be increased by producing less output.

Question

Quizplus · Accepted Answer

The firm is making an economic profit because the price (P = $5) is greater than the average total cost (ATC = $4). Since marginal revenue (MR = $3) is greater than marginal cost (MC = $2), the firm can increase its profit by producing more output.

A Pure Monopolist Is Producing an Output Such That ATC