Author Question: What is the profit-maximizing rule for a monopolist? What will be an ideal ... (Read 73 times)

plus1 · **on:** Jun 29, 2018

What is the profit-maximizing rule for a monopolist?

What will be an ideal response?

Question 2

What is the relationship between the marginal benefit, value, and demand?

What will be an ideal response?

diesoon · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A profit-maximizing monopolist will continue to increase production as long as marginal revenue is greater than marginal cost. Thus, maximum profit occurs where marginal revenue is equal to marginal cost. Incidentally, it is worth noting that this profit-maximizing rule applies to all firms no matter the market structure that it operates in.

Answer to Question 2

The value of one more unit of a good is its marginal benefit. The marginal benefit of a good or service is measured by the maximum amount that consumers are willing to pay for one more unit of a good or service. The demand curve shows the maximum consumers are willing to pay for each additional unit, so the demand curve is the same as the marginal benefit curve.