Question

Explain why a monopolist maximizes its long-run profit by producing that output for which marginal revenue...

Explain why a monopolist maximizes its long-run profit by producing that output for which marginal revenue equals long-run marginal cost. What sense does this monopolist pricing differ to perfect competitive market? (

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Monopoly in long run (as well as in short run) earns positive economic profit, because it produces at a point where MR=MC. Price in monopoly is set above marginal cost in order to let the firm earn positive economic profit. When the marginal revenue of selling a good is greater than the marginal cost, firms are Making a profit on that good. A monopoly follow this Marginal decision rule and so it's profit maximization involves setting MR=MC. However, in perfect competition firms always maximize profit by setting price=MC. It means that price in monopoly is set above the price charged in perfect competition, while monopolist produce less amount of goods that are produced in perfect competition. This indicates a market inefficiency in case of monopoly.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In the long run, a pure monopolist will maximize profits by producing that output at which...
In the long run, a pure monopolist will maximize profits by producing that output at which marginal cost is equal to a. average total cost b. marginal revenue c. average variable cost d. average cost.
Question 1 In order for a monopolist to earn an economic profit in short-run equilibrium, marginal...
Question 1 In order for a monopolist to earn an economic profit in short-run equilibrium, marginal revenue must be equal to zero. True False ____________________________________________________ Question 5 Which of the following is true for the monopolist? Marginal revenue is less than the price charged. Economic profit is possible in the long-run. Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost. All of the above. None of the above. _________________________________________________________ Question 12 An industry is said to be...
State whether the following statements are True or False A single-price monopolist maximizes profit where marginal...
State whether the following statements are True or False A single-price monopolist maximizes profit where marginal benefit is at its maximum. A single-price monopolist maximizes profit where marginal cost is at its minimum. The profit-maximizing point for a single-price monopolist is also the revenue maximizing point. In general, price discrimination raises the efficiency of markets. explain/show why.
Why is the level of output at which marginal revenue equals marginal cost the profit maximizing...
Why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?
Why is the level of output where marginal revenue equals marginal cost called as the profit-maiximizing...
Why is the level of output where marginal revenue equals marginal cost called as the profit-maiximizing output under either perfect competition or monopoly ? prove it in a logical way
If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost,...
If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost, should it produce more, less or the same? Why? What is the profit-maximizing quantity for any firm to produce?
State whether the following statements are True or False, and explain/show why. A single-price monopolist maximizes...
State whether the following statements are True or False, and explain/show why. A single-price monopolist maximizes profit where marginal benefit is at its maximum. A single-price monopolist maximizes profit where marginal cost is at its minimum. The profit-maximizing point for a single-price monopolist is also the revenue maximizing point. In general, price discrimination raises the efficiency of markets.
Suppose a monopolist faces the following demand curve: P = 750 – Q.If the long run...
Suppose a monopolist faces the following demand curve: P = 750 – Q.If the long run marginal cost of production is constant and equal to $30. a) What is the monopolist’s profit maximizing level of output? b) What price will the profit maximizing monopolist charge? c) How much profit will the monopolist make if she maximizes her profit? d) What would be the value of consumer surplus if the market were perfectly competitive? e) What is the value of the...
Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is...
Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is FALSE? A) The firm is making zero economic profit. B) The firm produces the quantity of output for which marginal revenue equals marginal cost. C) The average total cost equals the price. D) The firm produces the quantity at which the marginal revenue curve intersects the demand curve.
Why don’t firms in a competitive market have excess capacity in the long run? A. A...
Why don’t firms in a competitive market have excess capacity in the long run? A. A competitive firm always produces as much as it can, because it knows that other firms will also produce at their maximum capacity. B. For the types of goods produced in competitive markets, it is difficult to store any goods that cannot be sold immediately, so it does not make sense to invest in capital that provides the potential to produce more than the market...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT