Question

How does a monopolist determines its output level? Select one:

a. Government decides the output level when it gives the monopoly a patent.

b. By setting MR=MC.

c. By setting P=MC.

d. Any output is good for monopoly, because it’s profitable in the long run.

Answer 1

Option b

b. By setting MR=MC

A profit of any firm I maximum at MR=MC, also, monopoly has the same demand curve as the market demand curve, so the demand curve is downward sloping and MR curve is double sloped than the demand curve.

A profit is maximum when marginal profit is zero and the marginal profit =MR-MC, MR-MC=0 then MR=MC.

If monopolist produces at a different place, then the monopolist will lose some or all of its profit, so a monopolist produces at MR=MC.