Equating Marginal Revenue and Marginal Cost

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Equating Marginal Revenue and Marginal Cost
111e aun of the monopolist. like every other producer. i. to maximize his total money profits. Therefore, hc will produce up to a point and charge a price which glue huu thc maxi ilium profiteroles. In other words, he will he in equilibrium at that price-output Level at which his profits are the maximum. lie will go on producing so long as additional units add more to the revenue than to the cost. 0e will stop at that point beyond which additional units of production add Ivoire to cost than to revenue. In other words, he will he ill equilibrium position at that level of output at which marginal revenue equals marginal cost. That is, he will continue producing so long as marginal revenue exceeds marginal cost. He does so because profits will gogo Oil mcrca  as long as the marginal revenue exceeds the l1 Original t’OS!’ At the point where marginal rcvcc r equal to marginal Cistern. the profit will he maxamuud. ami here he stops. If the production is carried beyond the« point profits will leasill The price-output quilliam of lilt list can he ea ily understood Inuu diagram Nil U. AR is the demand curve or average revenue valli’ fall off the l0n ‘IX,list. MR is the marginal revenue CUI ve which the average revenue the avcr ugc cost curve all the 1ll.lIon  curve. It call be seen  the diagonal pill OM output. marginal revenue is greater Ihall inal  bUI beyond OM the marginal revenue i~Ic~~ than marginal co-t. Therefore. the monopolist will he in equilibrium at the output OM. where marginal revenue is equal to marginal cost and profits arc the lIl’a tcsl. The price ut 1\ hies output OM is ~old in the m.u Io-CtlI the known [rom looking at demand or average revenue curve AR. It can he  Irum the diagram

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Equating Marginal Revenue and Marginal Cost