The equilibrium level of output of a monopolist is determined at a point where
Answer Details
The equilibrium level of output of a monopolist is determined at a point where marginal revenue equals marginal cost.
A monopolist is a single seller in a market with no close substitutes for its product, which gives the monopolist market power to control the price of the product. The monopolist's goal is to maximize its profit by producing the level of output that generates the highest profit.
To determine this level of output, the monopolist must take into account the relationship between the marginal revenue it receives from selling an additional unit of output and the marginal cost of producing that unit. Marginal revenue is the additional revenue generated by selling one more unit of output, while marginal cost is the additional cost of producing one more unit of output.
The monopolist will continue to produce more output as long as the marginal revenue from selling an additional unit of output is greater than the marginal cost of producing that unit. The monopolist will stop producing more output when the marginal revenue from selling an additional unit of output is equal to the marginal cost of producing that unit. At this point, the monopolist has reached the equilibrium level of output, where it is maximizing its profit.
In summary, the equilibrium level of output of a monopolist is determined at a point where marginal revenue equals marginal cost. This is the level of output where the monopolist is maximizing its profit.