A local utility company has a monopoly on electricity in your town. After reviewing their cost structure, they decide to increase their output. Which of the following best describes the reason for this decision, considering the principles of profit maximization in monopolies?

A monopoly, like the local utility company, aims to maximize its profits by controlling prices and output. When the company decides to increase its output, it typically does so because it can lower the average cost of production through economies of scale. This means that producing more electricity allows the company to spread its fixed costs over a larger number of units, reducing the cost per unit. For example, if the company can produce 1,000 units of electricity at a lower cost per unit than when it produces only 500 units, it can sell the additional units at a price that still generates profit. Ultimately, by increasing output, the company can enhance its total revenue while maintaining its monopoly power.