Asked by Isaac Matsie on Jun 13, 2024
Verified
When marginal revenue is equal to marginal cost,the monopolist
A) should increase output to maximize profits
B) will maximize profits or minimize losses
C) will produce where price = ATC
Marginal Revenue
The extra income a company earns by selling an additional unit of a product or service.
Marginal Cost
The extra expense related to the production of an additional unit of a good or service.
- Calculate marginal revenue and understand its importance in profit maximization for monopolies.
Verified Answer
NH
Nyjah HenryJun 18, 2024
Final Answer :
B
Explanation :
At the point where marginal revenue is equal to marginal cost, the monopolist is maximizing their profits or minimizing their losses. Therefore, option B is the best choice. Option A is incorrect because increasing output may cause marginal costs to exceed marginal revenue, resulting in reduced profits. Option C is incorrect because producing where price is equal to average total cost is a breakeven point, and the aim of a monopolist is to earn profits, not just earn back their costs.
Learning Objectives
- Calculate marginal revenue and understand its importance in profit maximization for monopolies.
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