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A monopolist maximizes profit by choosing a quantity where marginal revenue equals marginal cost A process that companies undergo to determine the best output and price levels in order to maximize its return.
(This is complicated but very useful to compare profit maximization under different market condition) Stage1: To find profit maximizing output, we use MC & MR curves. To maximize profit Marginal Revenue must be equal to Marginal Cost. i.e. MR=MC Why profit maximize when MR=MC? To find out the answer to this question, observe when MR=/= (not equal to) MC. MC MR 1 3 2 5 3 10 4