What is the profit maximizing price?

Understand the Problem

The question is asking about the concept of profit maximizing price, which is the price at which a firm can achieve the highest possible profit. This typically involves understanding demand, costs, and pricing strategies.

Answer

Price where MR = MC or MR = 0 for monopolies.

The profit-maximizing price is where marginal revenue equals marginal cost, and for monopolies, it equally involves calculating the level where marginal revenue equals zero.

Answer for screen readers

The profit-maximizing price is where marginal revenue equals marginal cost, and for monopolies, it equally involves calculating the level where marginal revenue equals zero.

More Information

For perfectly competitive firms, profit-maximizing occurs where the price is equal to both marginal cost and marginal revenue. For monopolies, it involves analyzing where increasing output no longer increases total revenue.

Tips

A common mistake is not accurately determining MC and MR, which can lead to incorrect pricing decisions.

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