If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25, then
A)to maximise profit the firm should increase output.
B)to maximise profit the firm should decrease output.
C)to maximise profit the firm should continue to produce the output it is producing.
D)Not enough information is given to say what the firm should do to maximise profit.

Question

Quizplus · Accepted Answer

The monopolist should continue to produce and sell units as long as its marginal revenue (MR) is greater than its marginal cost (MC), which is the case in this scenario (MR > MC). Therefore, the firm should increase output to maximise profit until MR = MC.

If a Monopolist's Marginal Revenue Is $35 Per Unit and Its