In What Way Does the Profit-Maximization Problem for a Monopolist

question 118

Multiple Choice

In what way does the profit-maximization problem for a monopolist differ from that of a competitive firm

• A)A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost.
• B)A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at a point where average revenue exceeds marginal cost.
• C)For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output.
• D)For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with less costly alternatives.

Higher Wage

Refers to an increase in the amount of money that an employee receives for performing one hour or another standard unit of work.

Leisure Time

Free time that an individual can spend away from work, chores, and other compulsory activities, often used for relaxation or hobbies.

Labor Supply Curve

A visual diagram illustrating how the quantity of labor supplied is influenced by changes in the wage rate.