In order to maximize profits, a monopoly company will produce that quantity at which the ?
Correct answer: C. marginal revenue equals marginal cost
- A. marginal revenue equals average total cost
- B. Price equals marginal revenue
- C. marginal revenue equals marginal cost
- D. total revenue equals total cost
Explanation
A profit-maximizing firm expands output while the extra revenue exceeds the extra cost and stops where marginal revenue equals marginal cost. Average or total cost equality does not determine the profit-maximizing quantity.
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About Microeconomics
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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