If, at an output of 10 units, a monopoly is earning a positive profit (marginal revenue is $6 and marginal cost is $4), then the monopoly
A)should raise the price at the current output level.
B)should reduce output.
C)is in equilibrium.
D)should increase output.
E)should reduce output before increasing it.

Question

Quizplus · Accepted Answer

Since marginal revenue ($6) is greater than marginal cost ($4) at an output of 10 units, the monopoly can increase its profit by producing more units. This is because each additional unit produced adds more to revenue than it does to cost.

If, at an Output of 10 Units, a Monopoly Is