Homework Help: Microeconomics

Posted by Marilyn on Tuesday, July 7, 2009 at 4:09pm.

If a monopoly is producing at an output where its average total cost of production is minimized and equals $50 per unit and marginal revenue equals $60, is the monopoly producing at the profit-maximizing output level? Explain why or why not.

Microeconomics - economyst, Tuesday, July 7, 2009 at 7:17pm
Not profit maximizing.
At the minimum of the AC curve it must be true that MC=AC. So, MC=$50 and MR =$60. The firm could do better by producing more as the marginal revenue from selling one more unit exceeds the marginal cost of producing that extra unit.

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