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WAEC Economics 2004 Question 23

Question 23

Market Structures

For both the monopolist and the perfectly competitive firm, profit maximizing output occurs at the point where the

  1. A.marginal cost curve cuts the marginal revenue curve from below
  2. B.marginal revenue curve cuts the marginal output from above
  3. C.marginal cost curve intersects the X-axis
  4. D.marginal revenue curve intersects the Y-axis
Show the answer and explanation

Answer: A (marginal cost curve cuts the marginal revenue curve from below)

Explanation

Every firm maximises profit where MC = MR, with MC rising, i.e. MC cuts MR from below.