Figure 14-3
-Refer to Figure 14-3.The marginal revenue curve for a monopoly firm is depicted by curve

Question

Figure 14-3 
-Refer to Figure 14-3.The marginal revenue curve for a monopoly firm is depicted by curve

Quizplus · Accepted Answer

The best choice for the monopoly firm is where marginal revenue (MR) equals marginal cost (MC) at output Q2. This will maximize profits by producing the output level where the difference between MR and MC is the greatest. At any output level below Q2, MR is greater than MC, which means the monopoly can increase profits by producing more. At any output level above Q2, MC is greater than MR, which means the monopoly can increase profits by producing less. Curve B intersects with the MC curve at Q2, so it represents the MR curve for this firm.

Figure 14-3 -Refer to Figure 14-3.The Marginal Revenue Curve for a Monopoly