Question

According to "marginal revenue marginal cost approach" approach, a monopoly firm attains equilibrium when _______.

• A. MC = MR
• B. MC curve must cut MR curve from below
• C. AR < MC
• D. both (A) and (B)

Answer 1

Answer: (D)

both (A) and (B)

For profit to be maximized the difference between MR and MC should be zero. If MR > MC it is profitable to increase production and when MR < MC it is profitable to decrease production. And the MC curve should intersect the MR curve from below for maximising profit in absolute terms. (Higher output will lead to larger total revenue).