I would go with A.
Draw a typical monopoly model, with a demand curve and a marginal revenue curve. Draw a MC curve. At the optimal Q, What is the price (aka Average revenue)? What is the MR value?
BTW, with linear-drawn demand and MR "curves", Revenue is maximized when MR is zero. However, this is not the optimal profit point (unless MC
Monopolistic Competition
A profit-maximizing firm in a monopolistically competitive maket is characterized by which of the following:
A. Average revenue exceeds marginal revenue.
B. Marginal revenue exceeds average revenue,
C. Average revenue is equal to marginal revenue.
D. Revenue is always maximized along with profit.
I picked D?
2 answers
I would go with A.
Draw a typical monopoly model, with a demand curve and a marginal revenue curve. Draw a MC curve. At the optimal Q, What is the price (aka Average revenue)? What is the MR value?
BTW, with linear-drawn demand and MR "curves", Revenue is maximized when MR is zero. However, this is not the optimal profit point (unless MC is zero also)
Draw a typical monopoly model, with a demand curve and a marginal revenue curve. Draw a MC curve. At the optimal Q, What is the price (aka Average revenue)? What is the MR value?
BTW, with linear-drawn demand and MR "curves", Revenue is maximized when MR is zero. However, this is not the optimal profit point (unless MC is zero also)
5 answers