Asked by Brit'Ney McCoy on May 24, 2024
Verified
A certain monopolist has a positive marginal cost of production.Despite this fact, the monopolist decides to produce a quantity of output that maximizes total revenues.Assume that the marginal revenue curve for this monopolist always has a negative slope.Then the monopolist
A) is minimizing its profits.
B) produces the same output that it would if it maximized profits.
C) produces less output than it would if it maximized profits.
D) produces more output than it would if it were maximizing profits.
E) produces an output where marginal revenue is strictly less than 1.
Marginal Revenue
The increase in revenue resulting from the sale of one additional unit of a product.
Marginal Cost
The increase in total cost that arises from producing one additional unit of a product or service, a crucial concept in economics for optimizing production levels.
- Absorb the notion of maximizing earnings in a monopolistic setting.
Verified Answer
JO
Julius OrengeMay 29, 2024
Final Answer :
D
Explanation :
A monopolist aiming to maximize total revenues rather than profits will produce more output than if they were maximizing profits, because profit maximization occurs where marginal cost equals marginal revenue, which is at a lower quantity than where total revenue is maximized.
Learning Objectives
- Absorb the notion of maximizing earnings in a monopolistic setting.