GCEEconomicsMarket Structures2024

A profit-maximising monopolist faces a demand function where total revenue at 10 units of output is ₦800 and at 11 units is ₦847. If the marginal cost of the 11th unit is ₦50, the monopolist should

Areduce output because marginal revenue exceeds marginal cost
Bincrease output because marginal cost exceeds marginal revenue
Cmaintain output at 10 units because marginal revenue equals marginal cost
Dincrease output because marginal revenue exceeds marginal costCORRECT
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Why the answer is D, and why the others tempt you.
Marginal revenue from the 11th unit = ₦847 − ₦800 = ₦47. Since MR (₦47) is less than MC (₦50), the firm should NOT produce the 11th unit — wait, re-checking: MR = ₦47 < MC = ₦50, so the firm should reduce output. However, the question asks about the decision at 10 units looking forward; at the 11th unit MR (₦47) < MC (₦50), so the profit-maximising output is 10 units. The correct interpretation is that the firm should NOT increase to 11 units; it should stay at 10 units. Re-evaluating the answer: D is incorrect; the firm should maintain 10 units. The correct answer is C — maintain output at 10 units because moving to 11 units would mean MR < MC, reducing profit.
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