Figure 15-2
The figure below illustrates the cost and revenue structure for a monopoly firm.

-Refer to Figure 15-2.If the monopoly firm wants to maximize its profit,it should operate at a level of output equal to

Question

Figure 15-2
The figure below illustrates the cost and revenue structure for a monopoly firm.
 
-Refer to Figure 15-2.If the monopoly firm wants to maximize its profit,it should operate at a level of output equal to

Quizplus · Accepted Answer

The monopoly firm should operate at the level of output where marginal revenue (MR) equals marginal cost (MC). In the given figure, at Q₂, MR intersects MC, which means that the firm can increase its profit by producing and selling one more unit at this level of output. At any other level of output, either MR is greater than MC or MC is greater than MR, which would result in a reduction in profit. Therefore, the best choice for the monopoly firm to maximize its profit is to operate at Q₂.

Figure 15-2 the Figure Below Illustrates the Cost and Revenue Structure for Structure