The second-order condition for a monopoly maximizing its profit is: A) (d²R(Q)/dQ²) − (d²C(Q)/dQ²)

Question

The second-order condition for a monopoly maximizing its profit is: A) (d²R(Q)/dQ²) − (d²C(Q)/dQ²) < 0. B) (d²R(Q)/dQ²) − (d²C(Q)/dQ²) = 0. C) (dMR/dQ) < (dMC/dQ). D) (d²R(Q)/dQ²) − (d²C(Q)/dQ²) < 0 or (dMR/dQ) < (dMC/dQ).

Quizplus · Accepted Answer

The second-order condition for profit maximization in a monopoly involves ensuring that the marginal revenue's rate of change with respect to quantity is less than the marginal cost's rate of change with respect to quantity. This ensures that the profit-maximizing quantity is at a point where profit is maximized, not minimized. The complex expressions in the other options are not standard representations of this condition.

The Second-Order Condition for a Monopoly Maximizing Its Profit Is