Question

if a monopolist finds that its marginal revenue equals its marginal costs at the current level of output, it should
do nothing; it has maximized profits.
contract production until the difference between marginal revenues and marginal costs is larger.
expand output until marginal revenue exceeds marginal costs.
expand output until price equals marginal costs.
raise its price.

Explanation:

In economics (a subfield of Business), the profit - maximizing rule for a monopolist (and other firms in different market structures) is to produce at the output level where marginal revenue ($MR$) equals marginal cost ($MC$). When $MR = MC$, the firm has maximized its profit. Let's analyze each option:

• Option "contract production until the difference between marginal revenues and marginal costs is larger": Reducing output when $MR = MC$ would move the firm away from the profit - maximizing point. Also, the goal is not to increase the difference between $MR$ and $MC$ but to have them equal for profit maximization.
• Option "expand output until marginal revenue exceeds marginal costs": If a firm expands output until $MR>MC$, it means that the additional revenue from producing one more unit is greater than the additional cost. But this would mean the firm has not yet reached the profit - maximizing point. The profit - maximizing point is when $MR = MC$, and if $MR>MC$, producing more units will increase profit until $MR = MC$. So this option is incorrect.
• Option "expand output until price equals marginal costs": For a monopolist, the demand curve is downward - sloping, and $MR$ is less than price. The profit - maximizing rule is $MR = MC$, not price equals $MC$. So this option is incorrect.
• Option "raise its price": Raising the price without considering the relationship between $MR$ and $MC$ does not guarantee profit maximization. The key is the relationship between $MR$ and $MC$ in terms of output level.
• Option "do nothing; it has maximized profits": Since the monopolist is producing at the output level where $MR = MC$, it has achieved profit maximization, so it should do nothing.

Answer:

do nothing; it has maximized profits.