The profit-maximizing oligopolist produces at the level of output where
A)price equals marginal cost.
B)marginal revenue equals marginal cost.
C)price is less than average total cost.
D)price equals average total cost.

Question

Quizplus · Accepted Answer

The profit-maximizing output level for an oligopolist occurs where marginal revenue (MR) equals marginal cost (MC). This is because oligopolies have market power, so increasing production will not result in a significant decrease in price. Therefore, the oligopolist will continue to increase output as long as MR>MC, which is the point where profit is maximized.

The Profit-Maximizing Oligopolist Produces at the Level of Output Where