A monopolist maximizes profit by producing the quantity at which ?
Correct answer: A. marginal revenue equals marginal cost
- A. marginal revenue equals marginal cost
- B. marginal revenue equals price
- C. marginal cost equals price
- D. marginal cost equals demand
- E. none of these answers
Explanation
Profit changes by marginal revenue minus marginal cost when output changes by one unit. Profit is maximized at the output where marginal revenue equals marginal cost, provided the firm is operating on the appropriate part of its cost curve.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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