For a monopolist, the profit- maximizing level of output occurs where

Question

Quizplus · Accepted Answer

A monopolist maximizes profits where marginal revenue (MR) is equal to marginal cost (MC). This is because the monopolist's demand curve is downward sloping, meaning that in order to sell more output, the monopolist must lower the price of all units sold. Therefore, the marginal revenue earned from an additional unit of output is less than the price at which it is sold, and the monopolist will only produce additional units as long as their marginal cost is less than this lowered marginal revenue. The point at which MC = MR is the profit-maximizing level of output for the monopolist.

For a Monopolist, the Profit- Maximizing Level of Output Occurs