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JAMB Economics 1985 Question 16

Question 16

Market Structures

If monopoly is attempting to maximize profit which of the following should it attempt to do?

  1. A.Select that output at which ATC is at minimum
  2. B.Set price equal to TC
  3. C.Maximize profit per unit
  4. D.Maximize revenue
  5. E.Equate marginal cost to marginal revenue.
Show the answer and explanation

Answer: E (Equate marginal cost to marginal revenue.)

Explanation

Any firm, monopoly included, maximises total profit by producing where marginal cost equals marginal revenue.