Profit-maximizing monopolists never produce in the range of output where MR is negative because
A) costs and revenues are falling as output is rising.
B) costs are falling as revenues and output are rising.
C) costs and output are rising as revenues are declining.
D) costs, revenues, and output are rising.

Question

Quizplus · Accepted Answer

In a monopolistic market, the marginal revenue (MR) curve is downward sloping due to the negative relationship between the quantity of output produced and the price at which it can be sold. When MR becomes negative, it means that producing an additional unit of output will decrease total revenue. Therefore, a profit-maximizing monopolist will avoid producing in this range because it indicates that the cost of producing an additional unit (marginal cost) is less than the revenue gained from selling it, leading to a decrease in overall profit.

Profit-Maximizing Monopolists Never Produce in the Range of Output Where