If a monopolist sets output at a level where marginal revenue is less than marginal cost, what is the likely effect on the firm's profit and market efficiency?

When a monopolist sets output where marginal revenue is less than marginal cost, it means that the cost of producing one more unit is higher than the revenue gained from selling that unit. This situation usually leads to a decrease in the firm's profit, because the monopolist is not maximizing their earnings. For example, if producing one more toy costs $10 but only brings in $8 in sales, the firm loses money on that additional toy. Furthermore, this decision can reduce market efficiency, as resources are not being used in the best way to meet consumer demand. Overall, the monopolist would benefit from reducing output to a level where marginal revenue equals marginal cost, leading to higher profits and better market efficiency.