At an output level of 100,a monopolist faces MC = 15 and MR = 17.At output level q = 101,the monopolist faces MC = 16 and MR = 15.To maximize profits,the firm
A)should produce 100 units.
B)should produce 101 units.
C)The firm cannot maximize profits.
D)The firm is not a monopoly.

Question

Quizplus · Accepted Answer

A monopolist maximizes profits at the output level where MR=MC. At an output level of 100, the monopolist faces MR=17 and MC=15, which means that the firm can increase profits by producing more. At an output level of 101, the monopolist faces MR=15 and MC=16, which means that the firm can decrease profits by producing more. Therefore, the firm should continue producing 100 units to maximize profits.

At an Output Level of 100,a Monopolist Faces MC =