Why a monopoly farm cannot produce the minimum point of Average Cost(AC)curve?
krishna-agrawala Teacher Graduate School It is not quite correct to say that a monopoly firm cannot produce and sell at an output level where its average cost of production are minimum. It is just that a monopoly firm is not likely to produce and sell its product at a price such that the average production cost of all the goods demanded are minimum. This is because business firms are not just interested in reducing their costs. They actually try to maximize their profits, which is impacted, in addition to cost, by price and turnover. A monopoly firm can increase the price of the goods sold by restricting it’s output below the point of least average cost. In this way they can maximize heir profits by restricting their production to a point where the total revenue minus the total cost is maximized, rather than the point at which average cost is minimized. Rate answer: $(‘#aScore-111213’).
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