Author Question: What two things does the level of total variable costs depend on? What will be an ideal ... (Read 16 times)

robinn137

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What two things does the level of total variable costs depend on?
 
  What will be an ideal response?

Question 2

Why will a profit-maximizing, single-price monopolist NOT produce the amount of output that maximizes its total revenue?
 
  What will be an ideal response?



katkat_flores

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Answer to Question 1

(1.) The techniques of production which are available.
(2.) The prices of inputs required by each technology.

Answer to Question 2

When total revenue is at its maximum, the demand is unit elastic and marginal revenue equals zero. However, to maximize its profit, a single-price monopolist produces so that its marginal revenue equals its marginal cost. If marginal revenue equals zero, then in order for this level of output to maximize the monopolist's profit, marginal cost also must equal zero. But marginal cost will never equal zero because to produce another unit always incurs some costs. Since marginal cost cannot equal zero, it is impossible for a profit-maximizing single-price monopolist to produce the amount of output that maximizes its total revenue.



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