Question

Samsung sells its smartphones to competitive wholesalers​ who, in​ turn, sell the phones to the public....

Samsung sells its smartphones to competitive wholesalers​ who, in​ turn, sell the phones to the public. To maximize its​ profit, Samsung produces the quantity of smartphones that sets the​ _____ of a smartphone equal to the​ _____ of a smartphone.

A.

retail marginal​ revenue; marginal cost of production

B.

retail​ price; marginal cost of production plus the marginal cost of distribution

C.

wholesale marginal​ revenue; marginal cost of production

D.

retail​ price; marginal cost of production

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Answer #1

ANSWER-

Under perfect competition a firm maximises it's profit at a point where marginal revenue is equal to the marginal cost.

So, Samsung sells its smartphones to competitive wholesalers​ who, in​ turn, sell the phones to the public. To maximize its​ profit, Samsung produces the quantity of smartphones that sets the retail marginal​ revenue of a smartphone equal to the​ marginal cost of production of a smartphone. As is will be the point where samsung will maximize it's profit.

Hence, the answer is (A) retail marginal​ revenue; marginal cost of production

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