Question

A monopolist is able to maximize its profits by

Answer 1

A monopolist maximizes profits by producing up to the point where marginal revenue equals marginal cost (MR=MC). Then, the firm sets a price above the marginal cost to sell at the profit-maximizing quantity. This ensures each additional unit sold maximizes profit.

Step-by-step explanation:

A monopolist is able to maximize its profits by identifying the output level where marginal revenue (MR) is equal to marginal cost (MC). This optimal point is where producing one more unit brings in revenue equal to the cost of producing that unit, ensuring that profit is maximized on each additional unit sold. To find the profit-maximizing price and quantity, the monopolist increases quantity incrementally, comparing marginal revenue and marginal costs, and then sets the price at which consumers are willing to buy that optimal quantity, which is typically above the marginal cost, allowing the firm to earn a monopoly profit.

The process for a monopolistic competitor to select its profit-maximizing quantity and price is similar. First, the firm decides the quantity that will maximize profits, and then determines the price consumers are willing to pay for that quantity. The intersection of MR and MC is the key to this decision process, and this equilibrium can be graphically illustrated where the MR and MC curves intersect.

Answer 2

A monopolist is able to maximize profits by making the marginal revenue equals to marginal cost and making the price and quantity that intersects with the demand. In this theory, the business will earn maximum profits. Monopolist is a group of company where in it controls a specific product or services.