A Profit-Maximizing Monopolist That Produces in the Short Run Will

question 209

Multiple Choice

A profit-maximizing monopolist that produces in the short run will

• A) produce the level of output where marginal revenue exceeds marginal cost by the largest amount.
• B) increase output as long as the marginal revenue exceeds the marginal cost of producing that unit.
• C) produce the level of output where average total cost is at a minimum.
• D) increase price as long as the average revenue exceeds the average total cost.
• E) produce the level of output where average revenue exceeds average total cost by the largest amount.

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Definitions:

MPS

Marginal Propensity to Save, which is the fraction of an increase in income that is not spent on an increase in consumption.

Disposable Income

Funds that households can direct towards their saving and spending ambitions after income taxes are accounted for.

Consumption

The portion of income spent on goods and services rather than saved.

Billion

A number equivalent to one thousand million (1,000,000,000) or, in some number systems, a million million (1,000,000,000,000).