The correct option for given situation where monopolist’s profit or loss can be defined if it charges price where MR exceeds MC.
Answer to Problem 18MCQ
Option a is correct answer.
Explanation of Solution
Explanation for correct option:
a.
Marginal revenue is greater than the marginal cost then monopolist can increase its profit by increasing production units as per the output rule. The firm will earn profit if MR >MC. Therefore, option a is correct.
Explanation for incorrect options:
b.
Since it will earn profit as MR>MC, there will be no losses. Therefore, option b is incorrect.
c.
Since, it is difficult to say that firm earns breakeven as the output level is not given. Therefore, option c is incorrect.
d.
If MR exceeds MC then profit can be maximized by increasing the output level for which firms must reduce the prices. Therefore, option d is incorrect.
e.
In
Marginal revenue: MR refers to the revenue that is generated by the firm by selling one additional unit in the market.
Demand curve: Demand curve refers to the relationship between price and the output at which consumers are ready to purchase.
Chapter 11R Solutions
Krugman's Economics For The Ap® Course
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