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Which of the following is applicable to a monopolistic firm operating at the out...


Question

Which of the following is applicable to a monopolistic firm operating at the output where marginal cost equals marginal revenue?

Options

A)
Cost of production is at a medium
B)
The plant is of optimum size
C)
Price is above marginal revenue
D)
Average variable cost is at a minimum

The correct answer is C.

Explanation:

This Economics question is asking which statement is true for a monopolistic firm that is producing at the point where the marginal cost equals the marginal revenue. A monopolistic firm is a company that has control over the market for a particular product or service.

Option A states that the cost of production is at a medium. However, this statement is not true since the cost of production is not related to the point where marginal cost equals marginal revenue. So, this option is incorrect.

Option B states that the plant is of optimum size. However, this statement is also not true since the size of the plant is not related to the point where marginal cost equals marginal revenue. So, this option is also incorrect.

Option C states that the price is above marginal revenue. This statement is correct. When a monopolistic firm produces at the point where the marginal cost equals the marginal revenue, it is maximizing its profit. At this point, the firm charges a price that is higher than the marginal cost. Therefore, option C is the correct answer.

Option D states that the average variable cost is at a minimum. However, this statement is not related to the point where marginal cost equals marginal revenue. So, this option is incorrect.

In summary, the correct option for this question is option C, which states that the price is above marginal revenue. This is because a monopolistic firm that produces at the point where marginal cost equals marginal revenue maximizes its profit by charging a price that is higher than the marginal cost.


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