To Maximize Its Profits, a Monopoly Should Produce the Quantity

question 151

Multiple Choice

To maximize its profits, a monopoly should produce the quantity where its marginal cost equals its:

• A) average total cost.
• B) average variable cost.
• C) demand.
• D) marginal revenue.

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Definitions:

Quantitative Relationship

A relationship that can be expressed as a mathematical equation, showing how changes in one variable affect another quantitatively.

Marginal Product

The additional output that is produced by using one more unit of a particular input while keeping other inputs constant.

Production Possibilities

A curve or frontier that shows the maximum combinations of goods or services that can be produced with a given set of resources and technology.

Marginal Product

The additional output that is produced by using one more unit of a factor of production, while holding other factors constant.