When a profit-maximizing monopoly produces an output for which marginal revenue is less than marginal cost, the firm is
A)making a profit.
B)producing too little.
C)producing too much.
D)breaking even.
E)incurring a loss.

Question

Quizplus · Accepted Answer

For a profit-maximizing monopoly, the optimal level of production is where marginal revenue (MR) equals marginal cost (MC). If MR < MC, the firm is producing beyond the point where MR = MC, indicating it is producing too much. Reducing output would increase profits by reducing costs more than revenues.

When a Profit-Maximizing Monopoly Produces an Output for Which Marginal