GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Adjust his sales in the two markets so that his MR in each market just equals his aggregate marginal cost
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Always charge a higher price in the market where he sells more
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Always charge a higher price in the market where he sells less
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Charge the same price in both markets
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Detailed explanation-1: -In a monopolistic market, 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.
Detailed explanation-2: -We say that in a monopoly, profit is maximized when MR=MC, just like in a competitive market, when MR = Price = MC. You will remember that in a competitive market, the demand curve is flat. Its slope is zero. So, the derivative of this curve, which is the MR curve, also has a slope of zero (two times zero = zero).
Detailed explanation-3: -The monopolist’s profit maximizing level of output is found by equating its marginal revenue with its marginal cost, which is the same profit maximizing condition that a perfectly competitive firm uses to determine its equilibrium level of output.