Question

A manager of a monopoly firm notices that the firm is producing output at a rate at which average total cost is falling but is not at its minimum feasible point. the manager argues that surely the firm must not be maximizing its economic profits. the​ manager's argument is

Answer 1

It is due to the profit maximising rule in a monopoly is Marginal Revenue=Marginal Costs (MR=MC). If the price or the output is below the ATC then the firm is operating at a loss; however, should shut down production until price or output is less than AVC.