-For the monopoly in the above figure, if the firm is currently producing 700 units, which of the following is correct?
A) It could earn higher profits if it produced more units each day.
B) It could earn higher profits if it produced fewer units each day.
C) It is maximizing its profits.
D) It is incurring a loss.

Question

-For the monopoly in the above figure, if the firm is currently producing 700 units, which of the following is correct?
A) It could earn higher profits if it produced more units each day. 
B) It could earn higher profits if it produced fewer units each day. 
C) It is maximizing its profits. 
D) It is incurring a loss.

Quizplus · Accepted Answer

Producing fewer units could lead to higher profits for a monopoly if it is currently producing beyond the profit-maximizing quantity, where marginal cost exceeds marginal revenue. Reducing output to where marginal revenue equals marginal cost can increase profits.

-For the Monopoly in the Above Figure, If the Firm