According to theory, to maximize profit, a monopoly firm determines its _______ , _______ , and _______ curves and produces an output where _______ .
A) average fixed cost; demand; marginal revenue; MR = MC.
B) demand; marginal revenue; marginal cost; MR = MC.
C) demand, marginal revenue; marginal cost; MC

Question

According to theory, to maximize profit, a monopoly firm determines its _______ , _______ , and _______ curves and produces an output where _______ .
A) average fixed cost; demand; marginal revenue; MR = MC.
B) demand; marginal revenue; marginal cost; MR = MC.
C) demand, marginal revenue; marginal cost; MC < MR.
D) average fixed cost; demand; marginal cost; MR = MC.

Quizplus · Accepted Answer

A monopoly firm maximizes profit by producing at the point where marginal revenue equals marginal cost (MR = MC). In order to determine this point, the firm needs to know its demand and marginal revenue curves, as well as its marginal cost curve. Average fixed cost is not relevant for profit maximization.

According to Theory, to Maximize Profit, a Monopoly Firm Determines