Question

A manager of a monopoly firm notices that the firm is producing output at a rate at which average total cost is falling but is not at its minimum feasible point. the manager argues that surely the firm must not be maximizing its economic profits. the​ manager's argument is
a. ​correct, since a monopolist maximizes profit at a point where average total cost should be at its lowest level.
b. ​correct, since a monopolist maximizes profit at a point where average total cost is equal to marginal cost.
c. ​incorrect, since at the minimum feasible point of the average total cost​ curve, a monopolist earns zero profit.
d. ​incorrect, since profit maximization requires that marginal revenue equals marginal cost but does not require the average total cost to be at any particular level.

Answer 1

The correct option from the given options is "d. ​incorrect, since profit maximization requires that marginal revenue equals marginal cost but does not require the average total cost to be at any particular level."

Profit maximization refers to the short run or long run process by which a firm may decide the value, information, and yield levels that prompt the best benefit. Neoclassical financial aspects, at present the standard way to deal with microeconomics, as a rule models the firm as maximizing benefit.