Question

The following are the sufficient and necessary conditions for a monopolist to be able to maximize potential positive economic profits.

a) ∣Ep∣=1 and TR>TC
b) P* =MC and increasing MC
c) MR=MC and Increasing MC
d) TR>TC and MR=0

Answer 1

The correct condition for a monopolist to maximize positive economic profits is when MR equals MC, coinciding with an increasing MC.

Step-by-step explanation:

The question refers to the conditions under which a monopolist can maximize positive economic profits. From the provided options, the one that accurately describes the condition is c) MR=MC and Increasing MC. This stands for marginal revenue (MR) being equal to marginal cost (MC), which is the profit-maximization rule for monopolists. It is key to understand that the profit-maximizing output level is determined where MR equals MC, and the monopolist will then set the price based on the market demand curve at that level of output. If this price is higher than average cost, the monopolist earns positive profits.