A profit-maximizing monopoly will spend on a process innovation

Question

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A profit-maximizing monopoly will spend on a process innovation up to the point where marginal revenue (MR) equals marginal cost (MC). This is because the price charged by a monopoly is higher than the marginal cost, therefore, the MR is always higher than the MC. By producing an additional unit, the monopoly can increase its revenue by the MR and incur an additional cost by the MC. Therefore, the monopoly should continue to produce units until MR equals MC, which implies that the last unit produced adds as much revenue as cost, resulting in the maximum possible profit.

A Profit-Maximizing Monopoly Will Spend on a Process Innovation