Should a Monopolist who is producing at MC=MR increase output if it would increase total revenue?

Question

If a monopolist ins producing a level if output where MC=Mr, should it lower the price and increase output if this would increase total revenue?

Answer 1

No

MC=MR is optimal for a monopolist.  They're only interested in profits, not revenue.  If you deviate from MC=MR, then you're reducing profit even if you might be increasing revenue.

Answer 2

If goal is to increase revenue (not profit) then in many cases it's true - total revenue can be increased by increasing output. But sometimes output should be reduced in order to increase total revenue and sometimes MR=MC gives maximum total revenue.

Actually all depends on how cost will behave.

For example if demand is P=40-5Q and cost is TC=20+10Q then:

TR=Q*P=40Q-5Q^2

MR=40-10Q

MC=10

MR=MC

Q=3 (profit maximizing)

TR=75

Profit=TR-TC=75-50=25

While revenue maximizing Q will be

MR=0

40-10Q=0

40/10=Q

Q=4 (revenue maximizing)

TR=80

Profit=TR-TC=80-60=20

In this case in order to increase total revenue firm should reduce both price and profits but increase quantity.