The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
-If a monopolist is producing at a point at which marginal revenue is greater than marginal cost, then it should:
A)continue producing at the current level.
B)raise its prices.
C)lower its prices.
D)increase the level of production.
E)decrease the level of production.

Question

The figures given below represent the revenue curves of a monopolist.Figure 11.2
  TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
-If a monopolist is producing at a point at which marginal revenue is greater than marginal cost, then it should:
A)continue producing at the current level. 
B)raise its prices. 
C)lower its prices. 
D)increase the level of production. 
E)decrease the level of production.

Quizplus · Accepted Answer

If the marginal revenue is greater than marginal cost, it means that the next unit produced is generating more revenue than its cost, thus adding to the monopolist's profit. Therefore, the monopolist should increase the level of production until the point where marginal cost equals marginal revenue.

The Figures Given Below Represent the Revenue Curves of a Monopolist.Figure