Which is NOT TRUEQuestion 5 options:P > MCThe firm operates on the demand curve where |e| < 1
for a profit maximizing monopolist?
As Q increases, MR falls faster than Average Revenue
Profit maximizing Q for the firm is determined where MC = MR
Answer & Explanation
The firm operates on the demand curve where |e| < 1
Step-by-step explanation
The firm operates on the demand curve where |e| < 1
Firms in a monopolistic market maximize total profit at the point of quantity Q where the marginal cost to marginal revenue. For a monopolist, price exceeds marginal cost. Monopolist firms have a downward-sloping demand curve, then marginal revenue will be less than average revenue and can even be negative. The firm operates on the prices on the demand curve for any quantity produced.
What is true for a profit
The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.
Which of the following is necessarily true of the profit
Answer and Explanation: The correct option is (b) Price is greater than marginal cost.
Which of the following is not true for a profit
Answer and Explanation: (a) The monopolist faces a perfectly elastic demand curve is NOT generally true about a profit-maximizing monopolist.
What is true of the profit
The general rule is that the firm maximizes profit by producing that quantity of output where marginal revenue equals marginal cost.