Multiple Choice QuestionHow much will a profit-seeking monopolist produce if producing is preferable to shutting down?Multiple choice question.Up to the output at which marginal revenue equals marginal costAs much as possible, since more production means more revenueUp to the output at which marginal revenue exceeds marginal costUp to the output at which marginal revenue is less than marginal cost
Question
Multiple Choice QuestionHow much will a profit-seeking monopolist produce if producing is preferable to shutting down?Multiple choice question.Up to the output at which marginal revenue equals marginal costAs much as possible, since more production means more revenueUp to the output at which marginal revenue exceeds marginal costUp to the output at which marginal revenue is less than marginal cost
Solution
The correct answer is: Up to the output at which marginal revenue equals marginal cost.
Here's why:
A profit-seeking monopolist will produce up to the point where marginal revenue equals marginal cost. This is because the monopolist's goal is to maximize profit, and profit is maximized at the output level where the cost of producing an additional unit (marginal cost) is exactly equal to the revenue gained from selling that additional unit (marginal revenue). If the monopolist were to produce beyond this point, the cost of producing an additional unit would exceed the revenue gained from selling it, which would reduce overall profit.
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