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Zorluk: OrtaMonopoly: Short-Run and Long-Run Price and Output Determination

A profit-maximizing monopolist operating in short-run equilibrium will always earn supernormal profits whenever marginal revenue equals marginal cost.

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False. The condition where marginal revenue equals marginal cost (MR=MCMR = MC) determines the profit-maximizing or loss-minimizing output level. Whether the monopolist earns supernormal profit, normal profit, or incurs an economic loss depends on the relationship between market price (PP) and average total cost (ATCATC) at that output level.
The statement is false because setting marginal revenue equal to marginal cost (MR=MCMR = MC) is the necessary condition for determining the optimal output level. It allows a firm to either maximize total economic profit or minimize total economic loss. If market demand is weak or costs are high such that average total cost (ATCATC) is greater than price (PP) at MR=MCMR = MC, the monopolist will operate at a short-run loss.

Adım Adım Çözüm

1
Identify the equilibrium condition for output determination in a monopoly.
A monopolist maximizes profit or minimizes loss by setting marginal revenue equal to marginal cost (MR=MCMR = MC).
At MR=MCMR = MC, the firm has no incentive to increase or decrease output because total profit is at its maximum (or total loss is at its minimum).
2
Analyze how profitability is determined at the equilibrium output level.
Profit per unit is calculated as price minus average total cost (P−ATCP - ATC).
If P>ATCP > ATC, the firm earns supernormal profit; if P=ATCP = ATC, it earns normal profit; if P<ATCP < ATC, it incurs a short-run economic loss.

Anahtar Kavram

Monopoly Short-Run Profit and Loss Equilibrium Conditions
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Konular

Monopoly: Short-Run and Long-Run Price and Output Determination

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