Question

If the monopoly firm's marginal cost curve is either horizontal or upward sloping, it follows that its marginal revenue curve will cut its marginal cost curve at a __________ level of output than where its demand curve cuts its marginal cost curve. It also follows that if the firm were to produce the quantity of output consistent with where its demand curve cut its marginal cost curve, the firm would be __________.

Answer 1

Answer: If the monopoly firm's marginal cost curve is either horizontal or upward sloping, it follows that its marginal revenue curve will cut its marginal cost curve at a LOWER level of output than where its demand curve cuts its marginal cost curve. It also follows that if the firm were to produce the quantity of output consistent with where its demand curve cut its marginal cost curve, the firm would be RESOURCE-ALLOCATIVE EFFICIENT.