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Suppose the marginal cost for the 1,000th unit of a monopolist's output is $40, marginal revenue is $30, the average variable cost of producing 1,000 units is $30, and the average total cost is $50. In order to maximize profit or minimize loss in the short run, the firm should _____

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Answer:

Produce less outputs

Explanation:

Given:

  • Marginal revenue is $30
  • Marginal cost: $40

As we know that to maximize profit or minimize loss in the short run, the marginal cost must be equal to the marginal revenue or MC = MR

However, in this situation, the marginal revenue is smaller than the marginal cost so the firm should produce less outputs in an attempt to reduce the marginal cost

Hope it will find you well.