An oligopolist producing where MR MC should lower its price and increase output to maximize its profits.

Question

An oligopolist producing where MR > MC should lower its price and increase output to maximize its profits.

Quizplus · Accepted Answer

If MR (marginal revenue) is greater than MC (marginal cost) in an oligopoly market, it means that the firm can increase its profit by increasing production and lowering the price. This is because the additional revenue gained from selling the extra units of the product is higher than the cost of producing them, resulting in a net gain in profit. Therefore, the firm should increase output and lower the price until MR equals MC, which is the profit-maximizing level of production.

An Oligopolist Producing Where MR > MC Should Lower Its