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the diamond company has a monopoly in their market. the marginal cost to produce 1 carat of diamonds is $5 000, and the average total cost at current production levels is $6 500. if the diamond company is maximizing their profits then what is their marginal revenue?

User Yurgis
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Final answer:

If the diamond company is maximizing their profits in a monopolistic market, the marginal revenue for producing an additional carat of diamonds should equal the marginal cost, which is $5,000.

Step-by-step explanation:

In the scenario where the diamond company has a monopoly in the market, to determine the marginal revenue when they are maximizing their profit, we need to consider the relationship between marginal cost and marginal revenue. For a profit-maximizing firm, especially in a monopoly, the condition for profit maximization is when marginal cost equals marginal revenue (MC = MR).

In this case, the marginal cost to produce 1 carat of diamonds is provided as $5,000. If the company is maximizing profits, their marginal revenue for the last unit sold must also be $5,000. This is because a monopolist will continue to produce additional units as long as the marginal revenue exceeds the marginal cost. Once MR equals MC, that is the profit-maximizing quantity of output, and additional production would reduce profits.

Thus, if the monopoly is maximizing their profits, their marginal revenue for 1 carat of diamonds should be $5,000.

User Safy
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