this unit will clearly add to overall profits. At an output of 5, marginal revenue is 400 and marginal cost is 400,
226 9 • Monopoly

so producing this unit still means overall profits are unchanged. However, expanding output from 5 to 6 would

involve a marginal revenue of 200 and a marginal cost of 850, so that sixth unit would actually reduce profits.

Thus, the monopoly can tell from the marginal revenue and marginal cost that of the choices in the table, the

profit-maximizing level of output is 5.

The monopoly could seek out the profit-maximizing level of output by increasing quantity by a small amount,

calculating marginal revenue and marginal cost, and then either increasing output as long as marginal

revenue exceeds marginal cost or reducing output if marginal cost exceeds marginal revenue. This process

works without any need to calculate total revenue and total cost. Thus, a profit-maximizing monopoly should
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