Like a perfectly competitive firm, a monopoly will maximize total profits by operating where marginal revenue equals marginal cost, provided that price exceeds average variable cost.

Question

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Both perfectly competitive firms and monopolies determine their profit-maximizing level of output by producing where marginal revenue (MR) equals marginal cost (MC), as this is the point where they cannot increase profit by producing more or less. The condition that price exceeds average variable cost ensures the firm covers its variable costs and continues operating in the short run.

Like a Perfectly Competitive Firm, a Monopoly Will Maximize Total