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WAEC Economics 2006 Question 27

Question 27

Market Structures

The equilibrium level of output of a monopolist is determined at a point where

  1. A.marginal cost equals average revenue
  2. B.marginal cost equals average cost
  3. C.marginal cost equals marginal revenue
  4. D.marginal revenue equals average cost.
Show the answer and explanation

Answer: C (marginal cost equals marginal revenue)

Explanation

Every profit-maximising firm, including a monopolist, produces where MC = MR.