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 __________.
A)lower; earning profits
B)lower; resource-allocative efficient
C)higher; productive efficient
D)lower; minimizing costs

Question

Quizplus · Accepted Answer

The marginal revenue curve for a monopoly is always below its demand curve. Therefore, it will intersect the marginal cost curve at a lower level of output than the demand curve. Producing where the demand curve intersects the marginal cost curve would mean the firm is producing at the socially optimal level, which is resource-allocative efficient.

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