If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal...
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If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal cost is equal to $30, the monopolist should
Profit Maximization
Profit maximization is the belief that firms control output and price levels to achieve a point where they maximize revenues. Profit is equal to total revenues minus total costs. Profit maximization is equal to marginal revenue minus marginal cost. The profit maximization point is where any changes in output or prices decreases the firms profits.
Answer and Explanation: 1
The monopolist should increase the quantity produced of the good or service until marginal revenue is equal to marginal cost. The marginal revenue is a downward sloping curve in a monopoly market structure. The marginal cost is an upward sloping curve in a monopoly market structure. If marginal cost is less than marginal revenue at a given output the monopolist needs to increase output until marginal revenue is equal to marginal cost.
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Profit Maximization: Definition, Equation & Theory
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