If a marginal revenue exceeds marginal cost, a monopolists should?
Correct answer: A. increase should
- A. increase should
- B. decrease output
- C. keep output the same because profits are maximized when marginal revenue exceeds marginal cost
- D. raise the price
Explanation
When marginal revenue exceeds marginal cost, producing one more unit adds more to revenue than to cost, so profit rises. The monopolist should continue increasing output until marginal revenue equals marginal cost.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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