Consider the following cost information for a monopolist: its MR = $15, its MC = $23, and it is producing nine units of output. Which of the following statements is correct?
A) The monopolist should produce and sell nine units of output.
B) The monopolist should increase production of output.
C) We need more information to decide if the firm needs to produce.
D) The monopolist should not produce this output because MR

Question

Consider the following cost information for a monopolist: its MR = $15, its MC = $23, and it is producing nine units of output. Which of the following statements is correct?
A) The monopolist should produce and sell nine units of output.
B) The monopolist should increase production of output.
C) We need more information to decide if the firm needs to produce.
D) The monopolist should not produce this output because MR < MC.

Quizplus · Accepted Answer

The monopolist is currently producing at a level where MR < MC. This means that each additional unit of output is costing the firm more to produce than it is generating in revenue. Therefore, it would not be profitable for the firm to produce this output, and it should reduce its production level.

Consider the Following Cost Information for a Monopolist: Its MR