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While a seller under perfect competition equates price and MC to maximize profits a monopolist should equate?
- a)MR and MC
- b)AR and MR
- c)AR and MC
- d)TC and TR
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
While a seller under perfect competition equates price and MC to maxim...
In a monopolistic market, there is only one firm that produces a product. There is absolute product differentiation because there is no substitute.
The marginal cost of production is the change in the total cost that arises when there is a change in the quantity produced.
The marginal revenue is the change in the total revenue that arises when there is a change in the quantity produced a firm maximizes its total profit by equating marginal cost to marginal revenue and solving for the price of one product and the quantity it must produce.
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While a seller under perfect competition equates price and MC to maxim...
In a monopolistic market, there is only one firm that produces a product. There is absolute product differentiation because there is no substitute. The marginal cost of production is the change in the total cost that arises when there is a change in the quantity produced. The marginal revenue is the change in the total revenue that arises when there is a change in the quantity produced. a firm maximizes its total profit by equating marginal cost to marginal revenue and solving for the price of one product and the quantity it must produce.
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While a seller under perfect competition equates price and MC to maxim...
Explanation:
Under perfect competition, a seller is a price taker, meaning that the price is determined by the market and the individual seller has no control over it. In order to maximize profits, the seller should equate price and marginal cost (MC). This is because in a perfectly competitive market, the price is equal to the marginal revenue (MR) for each unit sold.
A monopolist, on the other hand, is a price maker, meaning that it has the ability to set the price for its product. The monopolist's objective is to maximize profits by producing at a level where marginal revenue (MR) is equal to marginal cost (MC).
Explanation of the options:
a) MR and MC: The correct answer is option 'A'. A monopolist should equate marginal revenue (MR) and marginal cost (MC) to maximize profits. This is because MR represents the additional revenue generated from selling one more unit, while MC represents the additional cost incurred from producing one more unit. By equating MR and MC, the monopolist can determine the level of output at which it can maximize profits.
b) AR and MR: This option is incorrect. Average revenue (AR) represents the revenue per unit sold, while MR represents the additional revenue generated from selling one more unit. While a monopolist should consider both AR and MR, equating AR and MR alone is not sufficient to determine the level of output that maximizes profits.
c) AR and MC: This option is incorrect. While a monopolist should consider both average revenue (AR) and marginal cost (MC) in determining the level of output that maximizes profits, equating AR and MC alone is not sufficient. The monopolist should also consider marginal revenue (MR) to make the optimal decision.
d) TC and TR: This option is incorrect. Total cost (TC) and total revenue (TR) are important factors to consider, but they alone are not sufficient to determine the level of output that maximizes profits. The monopolist should also consider marginal revenue (MR) and marginal cost (MC) to make the optimal decision.
Conclusion:
In conclusion, a monopolist should equate marginal revenue (MR) and marginal cost (MC) to maximize profits. This allows the monopolist to determine the level of output at which it can maximize its profits.
Under perfect competition, a seller is a price taker, meaning that the price is determined by the market and the individual seller has no control over it. In order to maximize profits, the seller should equate price and marginal cost (MC). This is because in a perfectly competitive market, the price is equal to the marginal revenue (MR) for each unit sold.
A monopolist, on the other hand, is a price maker, meaning that it has the ability to set the price for its product. The monopolist's objective is to maximize profits by producing at a level where marginal revenue (MR) is equal to marginal cost (MC).
Explanation of the options:
a) MR and MC: The correct answer is option 'A'. A monopolist should equate marginal revenue (MR) and marginal cost (MC) to maximize profits. This is because MR represents the additional revenue generated from selling one more unit, while MC represents the additional cost incurred from producing one more unit. By equating MR and MC, the monopolist can determine the level of output at which it can maximize profits.
b) AR and MR: This option is incorrect. Average revenue (AR) represents the revenue per unit sold, while MR represents the additional revenue generated from selling one more unit. While a monopolist should consider both AR and MR, equating AR and MR alone is not sufficient to determine the level of output that maximizes profits.
c) AR and MC: This option is incorrect. While a monopolist should consider both average revenue (AR) and marginal cost (MC) in determining the level of output that maximizes profits, equating AR and MC alone is not sufficient. The monopolist should also consider marginal revenue (MR) to make the optimal decision.
d) TC and TR: This option is incorrect. Total cost (TC) and total revenue (TR) are important factors to consider, but they alone are not sufficient to determine the level of output that maximizes profits. The monopolist should also consider marginal revenue (MR) and marginal cost (MC) to make the optimal decision.
Conclusion:
In conclusion, a monopolist should equate marginal revenue (MR) and marginal cost (MC) to maximize profits. This allows the monopolist to determine the level of output at which it can maximize its profits.
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While a seller under perfect competition equates price and MC to maximize profits a monopolist should equate?a)MR and MCb)AR and MRc)AR and MCd)TC and TRCorrect answer is option 'A'. Can you explain this answer?
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