What happens to the firms marginal revenue as it sells additional units quizlet?

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he 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. T
hus, a profit-maximizing monopoly should follow the rule of producing up to the quantity where marginal revenue is equal to marginal cost—that is, MR = MC.
This quantity is easy to identify graphically, where MR and MC intersect.

Maximizing profits

If you find it counterintuitive that producing where marginal revenue equals marginal cost will maximize profits, working through the numbers will help.

Step 1. Remember, we define marginal cost as the change in total cost from producing a small amount of additional output.

MC=Change in total cost/quantity produced

Step 2. Note that in Table 9.3, as output increases from 1 to 2 units, total cost increases from $1500 to $1800. As a result, the marginal cost of the second unit will be:

MC=775-500/1
Step 3. Remember that, similarly, marginal revenue is the change in total revenue from selling a small amount of additional output.
CHANGE in total revenue/change in quANTITY SOLD =MARGINAL REVNUE

Step 4. Note that in Table 9.3, as output increases from 1 to 2 units, total revenue increases from $1200 to $2200. As a result, the marginal revenue of the second unit will be:
2200-1200/1
Quantity

Q
Marginal Revenue

MR
Marginal Cost

MC
Marginal Profit

MP
Total Profit

P
1
1,200
500
700
700
2
1,000
275
725
1,425
3
800
225
575
2,000
4
600
250
350
2,350
5
400
400
0
2,350
6
200
850
−650
1,700
7
0
1,500
−1,500
200
8
−200
2,400
−2,600
−2,400
Table9.4 Marginal Revenue, Marginal Cost, Marginal and Total Profit
Table 9.4 repeats the marginal cost and marginal revenue data from Table 9.3, and adds two more columns: Marginal profit is the profitability of each additional unit sold. We define it as marginal revenue minus marginal cost. Finally, total profit is the sum of marginal profits. As long as marginal profit is positive, producing more output will increase total profits. When marginal profit turns negative, producing more output will decrease total profits. Total profit is maximized where marginal revenue equals marginal cost. In this example, maximum profit occurs at 5 units of output.
A perfectly competitive firm will also find its profit-maximizing level of output where MR = MC. The key difference with a perfectly competitive firm is that in the case of perfect competition, marginal revenue is equal to price (MR = P), while for a monopolist, marginal revenue is not equal to the price, because changes in quantity of output affect the price.