If the monopoly firm's marginal cost curve is either horizontal or upward sloping, it follows that its marginal revenue curve will cut its marginal cost curve at a __________ level of output than where its demand curve cuts its marginal cost curve. It also follows that if the firm were to produce the quantity of output consistent with where its demand curve cut its marginal cost curve, the firm would be __________.

Question

Quizplus · Accepted Answer

In a monopoly, the marginal revenue curve lies below the demand curve. Therefore, the marginal revenue curve will intersect the marginal cost curve at a lower level of output than where the demand curve intersects the marginal cost curve. Producing where the demand curve intersects the marginal cost curve would mean the firm is resource-allocative efficient, as this is the socially optimal output level.

If the Monopoly Firm's Marginal Cost Curve Is Either Horizontal