Final answer:
A profit maximizing monopolist with marginal cost at 4 and marginal revenue at 8 will increase profits by producing more until marginal cost equals marginal revenue, as each additional unit produced adds to overall profit.
Step-by-step explanation:
If a profit maximizing monopolist is producing a level of output where the marginal cost is 4 and its marginal revenue is 8, it will increase its profits by continuing to produce until the marginal cost is equal to the marginal revenue. The basic principle in economics is that profit maximization occurs where marginal cost equals marginal revenue. In the given scenario, as the marginal revenue of 8 is higher than the marginal cost of 4, the monopolist can increase production to boost overall profits.
As illustrated in economics, a profit-maximizing firm should continue to increase output as long as its marginal revenue is greater than its marginal cost. This is because the sale of each additional unit at a marginal revenue greater than marginal cost contributes to an increase in overall profit. However, once marginal revenue equals marginal cost, any further increase in output would no longer contribute to profit growth, and thus the firm should not produce more.