GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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P < AC
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MR = MC
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MR < MC
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MR > MC
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Detailed explanation-1: -This amount of output will be termed as equilibrium output. According to marginal revenue and marginal cost approach, a monopolist will be in equilibrium when two conditions are fulfilled i.e., (i) MC = MR and (ii) MC must cut MR from below.
Detailed explanation-2: -If the monopolist increases production beyond MR = MC, then the marginal cost will be greater for each additional unit than marginal revenue, which will decrease profits, since costs continue to increase.
Detailed explanation-3: -Marginal revenue works differently for monopolies. For a monopolist, the marginal benefit of selling an additional unit is less than the market price. A firm’s average revenue is its total revenue earned divided by the total units. A competitive firm’s marginal revenue always equals its average revenue and price.