Homework Answers
Answer :
17 : Option b) Marginal Revenue (MR) = Marginal Cost (MC)
The firm in order to maximize profit, should produce where the additional revenue (MR) derived from the sale of the last unit equals the additional cost (MC) of producing it. Thereby keeping no unrealized gains.
18 : Option e) MR < P
At the profit maximizing point for the monopolist : MR = MC
Also the monopolist being the only seller in the market uses its power to influence the market price. Therefore the price set by a monopolist is always higher than its marginal cost of production.
Thus according to this : P > MC
Also MR = MC, so P > MR
MR < P (Option e).
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