Question

A monopolist is currently producing at the point where price equals marginal cost. The firm is currently earning positive profits. What should the monopolist do to maximize profits?

Answer 1

A monopolist should produce up to the quantity where marginal revenue is equal to marginal cost in order to maximize profits.

Step-by-step explanation:

The profit-maximizing strategy for a monopolist is to produce up to the quantity where marginal revenue (MR) is equal to marginal cost (MC), or MR = MC.

This means that the monopolist should continue to produce as long as the marginal revenue it receives from selling an additional unit is greater than or equal to the marginal cost of producing that unit. By doing so, the monopolist can maximize its profits.