Question

exercise 29: The diagram below illustrates the various output choices for a monopoly firm. Price angular MC D, AR Quantity 01 02 03 04 05 1. At what output rate will profits be maximized? How do you know? 2. At what output rate will revenue be maximized? How do you know? 3. At what output rate will society suffer no welfare loss? How do you know? 4. At what point will productive efficiency be achieved? How do you know? 5. At what output rate will the monopolist break even?

I am having trouble with this question over monopolies in Economics.

Answer 1

1) profits are maximized at Q2

At Profit maximization, MR = MC

2) revenue will be maximized at Q4

At revenue maximization, MR = 0

3) society suffers no loss at an output rate Q3

There is no loss to the society when P = MC

4) productive efficiency is achieved at Q1

At productive efficiency, MC = AC

5) monopolist breaks even at Q5

At break even, P= AC