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 at an output of 10 units a monopolist is earning a positive profit, marginal revenue is $6, and marginal cost is $4, then the monopolist:
A)is in equilibrium.
B)should increase output.
C)should reduce output.
D)should lower the price at the current output level.
E)should raise the price at the current output level.

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 at an output of 10 units a monopolist is earning a positive profit, marginal revenue is $6, and marginal cost is $4, then the monopolist:
A)is in equilibrium. 
B)should increase output. 
C)should reduce output. 
D)should lower the price at the current output level. 
E)should raise the price at the current output level.

Quizplus · Accepted Answer

Since marginal revenue (MR) is greater than marginal cost (MC) at an output of 10 units, the monopolist can increase profit by producing more units. This is because each additional unit produced adds more to revenue than it does to cost.

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