Hi everyone,
so this question is confusing me a bit:
Under imperfect competition, maximium profit is best described as occurring at the output level at which:
1) the difference between total revenue and total costs is greatest.
2) marginal revenue equals marginal cost
3) total revenue equals total cost.
Answer:
Maximum Profit occurs at the output level at which the difference between total revenue and total costs is greates.
It was my understanding that in all markets profits are maximized when MC=MR, and depending on pricing power, then the price may or may not be equal to MC. So why is 2) not correct?
so this question is confusing me a bit:
Under imperfect competition, maximium profit is best described as occurring at the output level at which:
1) the difference between total revenue and total costs is greatest.
2) marginal revenue equals marginal cost
3) total revenue equals total cost.
Answer:
Maximum Profit occurs at the output level at which the difference between total revenue and total costs is greates.
It was my understanding that in all markets profits are maximized when MC=MR, and depending on pricing power, then the price may or may not be equal to MC. So why is 2) not correct?