What should a profit maximizing monopolist do if she is currently producing where MC
A) Increase output until MC = MR.
B) Decrease output until MC = MR.
C) Shut down in the long run.
D) Keep producing at this level.
E) Operate only in the short run.

Question

Quizplus · Accepted Answer

A profit maximizing monopolist should increase output until MC = MR because producing at a lower output would mean leaving potential profit on the table, while producing at a higher output would mean incurring greater costs than the added revenue generated, thus reducing profits. Therefore, to maximize profits, the monopolist should increase output until MC = MR, where marginal revenue is equal to marginal cost.

What Should a Profit Maximizing Monopolist Do If She Is