Figure 15-3

-Refer to Figure 15-3.If the monopoly firm wants to maximize its profit,it should operate at a level of output equal to
A) Q1.
B) Q2.
C) Q3.
D) Q4.

Question

Figure 15-3
 
-Refer to Figure 15-3.If the monopoly firm wants to maximize its profit,it should operate at a level of output equal to
A) Q1. 
B) Q2. 
C) Q3. 
D) Q4.

Quizplus · Accepted Answer

The monopoly firm should operate at the level of output where marginal revenue equals marginal cost, which is at point Q2 in the graph. At a lower level of output, such as Q1, the marginal revenue would be higher than the marginal cost, which means the firm could increase profit by producing more. At a higher level of output, such as Q3 or Q4, the marginal cost would be higher than the marginal revenue, which means the firm could increase profit by reducing output. Therefore, B is the best choice as it maximizes the profit for the monopoly firm.

Figure 15-3 -Refer to Figure 15-3.If the Monopoly Firm Wants to Maximize