Why will a profit-maximizing, single-price monopoly NEVER produce the amount of output that maximizes its total revenue?
What will be an ideal response?
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 monopoly 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 monopoly's profit, marginal cost also must equal zero. But marginal cost will never equal zero because to produce another unit always incurs some costs. Because marginal cost cannot equal zero, it is impossible for a profit-maximizing single-price monopoly to produce the amount of output that maximizes its total revenue.
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Frank's Burgers employs workers in a competitive market. It currently has 15 employees. The marginal revenue product of the 15th worker hired is $8.50 per hour. The market equilibrium wage is $10 per hour
Is this firm maximizing profit? Explain.
Individuals face opportunity costs because
a. the minimum wage is too low b. technology is improving too quickly c. time and funds are scarce d. government cutbacks are widespread, except possibly among society's most affluent households e. welfare gives individuals an incentive to stay at home
Taxes on polluting firms for pollution are intended to
a. raise enough revenue to cut the deficit in half. b. encourage firms to reduce charges by polluting less. c. be efficient, i.e., result in no excess burden. d. raise revenue for general spending needs.
Empirical studies indicate that entry:
A. increases price and profits. B. decreases price, but increases profits. C. decreases price and profits. D. increases price, but decreases profits.