If a monopolist produces to a point at which marginal revenue is less than marginal cost then
A) the firm should increase output.
B) the firm should reduce output.
C) the firm is maximizing profits.
D) we do not know if the firm should increase or reduce without more information.

Question

Quizplus · Accepted Answer

Producing up to the point where MR=MC is the profit-maximizing output level for a monopolist. If the monopolist is producing beyond that point (i.e. where MR<MC), then it means that the cost of producing an additional unit outweighs the revenue gained from selling that unit. Therefore, reducing output will increase profits for the monopolist.

If a Monopolist Produces to a Point at Which Marginal