Asked by Taylor Whitworth on Jun 19, 2024

verifed

Verified

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.

Long Run

A period in which all factors of production and costs are variable, allowing firms to adjust to market changes fully.

Marginal Cost

The expense associated with manufacturing an extra single unit of a product or service.

Profit Maximizing

The process of adjusting production and sale strategies to achieve the highest possible profits.

  • Learn about the differentiation between price and marginal revenue for a monopolist and their role in enhancing profit maximization.
  • Examine the criteria for profit maximization in pure monopoly versus perfect competition contexts.
verifed

Verified Answer

MS
Matthew SchreiberJun 20, 2024
Final Answer :
B
Explanation :
A pure monopolist maximizes profits at the level of output where marginal revenue equals marginal cost. This is because a monopolist has control over the price it charges, so it can sell additional units at a price lower than the current price, thereby increasing revenue. However, producing additional units also incurs additional costs, hence, the monopolist needs to balance the two at the point where marginal revenue equals marginal cost to maximize profits.