At a price of $10, the marginal revenue of a monopolist is $6. if the marginal cost of production is $8, what should the monopolist do in order to maximize profits?

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19-08-2022
Business

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At a price of $10, the marginal revenue of a monopolist is $6. if the marginal cost of production is $8, what should the monopolist do in order to maximize profits?

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smecloudbird18 smecloudbird18 · Answer 1 · 2022-08-27T16:32:50+02:00

At a price of $10, the marginal revenue of a monopolist is $6. if the marginal cost of production is $8, the monopolist should keep the price at same level in order to maximize profits.

For increasing the profits the monopolist should increase the marginal revenue to $8 so that the mr =mc.

Every firm follows the rule of profit maximization. In this rule marginal cost is equal to the marginal revenue and the MR intersects the MC curve the profit will be the maximum at this level.

The marginal cost of production and marginal revenue are the economic measures which are used to determine the amount of output and the price per unit of a product that will maximize profits.

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